Rising salaries create an accounting wage expectation gap

This article was current at the time of publication.

When the Fair Work Commission lifted the minimum wage by 5.2 per cent in July, it fuelled expectations of pay rises for workers across the board. 

Peter Mogg FCPA knew his employees would want more than a 3 per cent salary increase this year, and that’s precisely what they got.

“Our employees are like everyone else – they read the newspapers and knew about that 5.2 per cent figure from the Fair Work Commission,” says Mogg, Director of Moggs Accounting and Advisory, which employs 42 people across its regional offices in Cobram in Victoria and Finley and Albury in New South Wales. 

“Inflation is a lot higher, so we are trying to keep real wages from going backwards, but we’re also finding that because of the skills shortage, industry and government organisations are paying way more than a public practice, and we need to find ways to keep people engaged. 

“Money isn’t everything, but it’s an important factor.”

Supply versus demand

Economic headwinds such as inflation are increasing operating costs for accounting firms across the country. At the same time, there’s a growing expectation that wages will continue to rise. 

Warren Hogan, Managing Director EQ Economics and Economic Adviser Judo Bank, attributes wage growth to the imbalance between labour supply and demand.

“From a numerical point of view, there were 480,000 recorded job vacancies by the Australian Bureau of Statistics in May this year,” Hogan says. 

“The highest we ever saw before the pandemic was about 235,000.

“Of course, some of this is related to supply, with temporary visa holders having to leave the country in the past few years, but it’s also a very sound indicator of demand. 

“No matter what part of Australia you’re in, no matter what industry you’re in, no matter what skills you’re looking for, they’re all in short supply.”

He adds that while the recent minimum wage lift and associated shifts in award benchmarks cover a quarter of the workforce, they have an important “signalling effect” on salaries in other areas.

“It’s almost an official rubber stamp on a 5 per cent move,” Hogan says. 

“The core of the issue around wages is that demand for labour is exceeding supply. The labour market is one of the most regulated markets in the economy and people at best renegotiate their wage every 12 months, so it takes time for it to flow through to the rest of the economy.” 

That, he says, is why the current inflation rate is having a significant impact on living standards. Wages can’t adjust quickly enough.

Skills shortage drives salary increases

The Hays Australia Salary Guide 2022-2023 indicates 91 per cent of employers will increase accountancy salaries in their next review, up from 74 per cent year-on-year.

“More than 30 per cent will award increases over 3 per cent and 60 per cent will award up to 3 per cent,” says Hays Accountancy & Finance Senior Regional Director David Cawley. 

“The skills shortage is the main driver of salary increases. It’s made 54 per cent of accountancy professionals more confident to ask for a pay rise and just over half say they’ve already benefited from the skills shortage through a salary increase, new job, or both.”

Mogg says the competition for talent is getting tougher. 

“We used to be able to say to somebody, ‘Look, you are on say $60,000, rather than going somewhere else for $70,000, stay here and you’ll get training, we’ll pay for extra study, we’re flexible with working hours and there are lots of other benefits’.  

“But now if the pay difference is $60,000 versus $90,000, it’s difficult.”

Attracting new accountants

Salary budgets can only stretch so far but in a job-rich, candidate-poor market, how can employers attract new accountants and keep the ones they have? 

Cawley says those who successfully attract staff have “reimagined their attraction strategy beyond salary” by tailoring each job offer to the individual.

“This includes the provision of a wider array of value-based benefits,” he says. 

“Our salary survey shows 33 per cent of accountancy employers have already improved benefits and working practices to entice more staff. 

“The top three sought by accountancy professionals are internal or external training, payment of professional membership fees, and more than 20 days of annual leave.”

He notes that flexible working continues to evolve and is now an expectation among candidates instead of just being seen as a benefit. 

“Today, 64 per cent of professionals look for an adaptive, hybrid approach when they job search, consisting of a flexible schedule rather than set in-office and remote days.

“More than half want the scope to change work hours outside of core business times and one-third want compressed working weeks.”

Although Moggs Accounting and Advisory employees received a salary increase this year, Mogg recommends that all firms consider the bigger picture.

“We have to provide more than money,” he emphasises. “We provide career opportunities, work-life balance, flexible hours, good tools, and a good culture.

“We are open and honest in saying to all our staff that if your main driver is money, then go work in the mines. You’ll make more money, but you’re away from home, away from family and you won’t have a clear career path.

“Look at the non-monetary benefits that you can give to people, especially things like the career path that can come with working in a public practice.”