Shortage of fresh graduates could force consolidation in Singapore’s accounting market

SINGAPORE’S smaller accounting firms are offering higher pay to combat competition among employers for fresh accountancy graduates.

But they are still struggling to hire, and experts say the outlook for such firms remains poor, given a shrinking talent pool.

The Big Four firms are outbidding small and medium-sized practices (SMPs) for accountancy graduates, said industry players.

Trying to hire fresh grads “has become a futile exercise”, said Robert Yam, managing director of Robert Yam & Co. The firm offers a monthly starting salary of up to S$3,300, but has not been able to hire local graduates in the past year.

Too many firms are chasing “a very small pool” of candidates, noted Bernard Lee, founder and senior partner at Audit Alliance. Over the past year, the firm has raised its monthly starting salary by 15 per cent to S$3,000, but more than 90 per cent of prospective hires declined its offers.

A shrinking pool

Part of the problem is that fewer undergraduates are studying accountancy, and not all of them go on to practise after graduation.

In the autonomous universities, total enrolment across all years in accountancy degree programmes has fallen to 5,182 in 2021, down from 5,650 in 2017.

Accountancy graduates are preferred over those from other courses, as they already have the basic knowledge and skills required, said Michael Heng, managing partner of Heng Lee Seng.

Pursuing professional qualifications – required at higher stages of the profession – also costs less time and money for accountancy graduates, who can get exemptions. This is better for firms, which typically sponsor the fees.

Responding to queries from The Business Times (BT), the National University of Singapore (NUS) said in recent years that fewer than half its accountancy graduates have gone on to work full time in accounting firms. At the Singapore Management University, a “stable” 60 per cent or so of accountancy graduates go on to practise.

A bidding war

As accountancy graduates grow scarcer, their salaries have risen sharply – and not all SMPs can keep up.

In 2022, the median monthly gross salary of accountancy graduates ranged from S$3,600 to S$3,825, as indicated by data from four of Singapore’s six autonomous universities. This was up from a range of S$3,000 to S$3,050 in 2019.

For NUS, those figures were for graduates without honours; its honours graduates were drawing a median salary of S$4,000 in 2022.

SMPs said this salary growth was partly driven by the Big Four – Deloitte, PwC, EY, and KPMG – which have dangled higher base pay under their global hiring spree.

While SMPs are trying to offer higher salaries, this also means higher manpower costs, forcing them to charge clients more.

Mid-sized firm Helmi Talib is raising its professional fees for various services by between 7 per cent and 10 per cent in 2023, its human resource director Rocel Magtibay told BT.

But the problem is that SMPs tend to compete on price, said Yam: “In most cases, any request for higher fees from a smaller firm will trigger the risk of losing the job to other smaller firms that can quote a lower fee.”

Apart from salaries, SMPs may be disadvantaged by “the general perception that due to their size, there could be fewer growth and career opportunities”, said Teo Ser Luck, president of the Institute of Singapore Chartered Accountants (Isca).

Struggling to survive

The lag between enrolment and graduation means the talent pool will only continue to shrink, worsening the problem.

If SMPs continue to struggle with hiring, consolidation among smaller players may be inevitable, said NUS professor of accounting Mak Yuen Teen, in his personal capacity.

This could have the “unhealthy” result of accounting-related services being even more concentrated among larger firms. He added: “Big firms may not provide the best services to smaller companies, as their priority tends to be the big clients.”

Isca’s Teo said: “We foresee further consolidation of the sector, streamlining of resources and greater adoption of technology by SMPs.”

In response to this urgent manpower issue, the Ministry of Finance set up the Accountancy Workforce Review Committee last year, he noted.

Isca will be submitting recommendations to this committee on “enhancing” the qualification exams – among other suggestions – to build up the talent pipeline, by including new areas of interest such as sustainability finance, data analysis, finance transformation, and environmental, social and governance audit.

Besides going digital to reduce manpower needs, firms can consider offshoring their accountancy functions, said Teo, though he noted that this is not a long-term solution.

Isca has created a membership pathway for experienced professionals from non-accounting backgrounds, which “broadens the talent pool”, he added.

Similarly, Moore Stephens Singapore senior partner Neo Keng Jin said mid-career switchers who undergo career conversion programmes can mitigate the manpower crunch.

SMPs can also hire more accountancy graduates from polytechnics, as well as university graduates from other disciplines, said Magtibay, whose firm has been doing so.

However, it takes more time and money to groom such graduates, and “there is no guarantee that they will stay”, said Yam.

Heng suggested that the government allow more foreigners to join the industry by increasing the quota of S Pass holders, currently capped at 10 per cent of the workforce for services firms.

But in Mak’s view, the industry must “do a much better job” in promoting the profession to potential students, and SMPs should “sell themselves better in terms of what they offer that the Big Four may not be able to”.

Said Mak: “I have on occasion advised students to consider joining an SMP rather than a Big Four because they may gain broader experience in an SMP, as they can get involved in more areas of work, rather than be a cog in a big wheel in a Big Four.”