Pay hikes by Big Four firms put pressure on smaller accounting practices

SOME of Singapore’s smaller accounting firms are raising entry-level wages by up to 25 per cent this year, in response to similar hikes by some Big Four firms.

When large players raise salaries, smaller firms must follow suit – or risk losing out in the war for talent, small and medium-sized practices (SMPs) told The Business Times.

“Mid-sized to smaller firms, we are the price takers,” noted Bernard Lee, founder and chief executive officer of Audit Alliance. “The Big Four are the price-setters.”

Audit Alliance will raise starting salaries for first-year hires by up to 20 per cent this year, to about S$3,200 per month.

The pay increase was one key recommendation to boost Singapore’s accounting talent pool, in a report released by the Accountancy Workforce Review Committee in May.

Following that report, two Big Four firms announced they would do just that. From Sep 1, first-year hires joining Deloitte as auditors will earn S$4,100 to S$4,500 a month, up about 20 per cent from starting salaries now.

KPMG has also announced a S$30 million initiative to raise salaries for eligible employees across its audit, tax and enterprise risk services units from October.

Some SMPs – those with fewer than 100 employees – are following suit, though the new salaries remain lower. SMP starting salaries typically hover around 70 to 80 per cent of those offered by the Big Four.

PKF Singapore managing partner Lee Eng Kian said: “Traditionally, mid-tier firms have always been slightly below the Big Four in terms of pay scale.

“Why? Because our fees are also slightly below the Big Four’s pricing, so it just cascades down from that.”

PKF is looking at a 5 to 10 per cent increase in starting pay, up from S$3,400 now.

By the end of 2024, mid-sized firm CA Practice plans to raise starting pay by 10 per cent to about S$3,600.

“We’ll see how it goes, because it’s also based on market sentiment,” said audit and advisory partner Zenith Kew. “If other SMPs raise the benchmark by, say, 15 per cent, then we (will) have no choice but to follow suit.”

Nexia Singapore is also studying how it can front-load starting salaries for first-year hires, said managing director Chua Soo Rui.

Though accountants may have lower starting pay than their peers in other industries, they typically have yearly promotions and pay increments in the first few years of their careers, Chua said.

To provide higher starting pay, these later pay hikes can be pushed earlier. “For the time being, we are trying to even the curve by front-loading some of the compensation.”

Starting salaries at Nexia will thus rise by 15 to 25 per cent this year, up from S$3,300 per month now.

Passing on costs

Payroll expenses typically form 60 to 70 per cent of an SMP’s overall costs, industry players said.

To fund salary hikes, firms will therefore have to pass on some costs to clients to avoid depressing margins – though there are limits to how much they can raise prices.

“We are trying to slowly increase our fee, but not many of the clients will buy in,” said Chua.

Some audit clients, for instance, “don’t see value in (it) because it’s just for compliance purposes, and they will just get the lowest-fee auditor”.

This “race to the bottom” in audit fees means that firms have to be careful not to price themselves out of engagements, even as costs increase, Chua said.

CA Practice will stagger price increments for clients over two to three years, Kew said, even though this means margins will be depressed in the short term.

“In a way, we are compromising with the clients – we suffer together,” Kew said.

Looking beyond pay

Even as SMPs raise salaries, however, they still have to compete for talent on factors beyond pay, industry players said.

“Salaries are just a hygiene factor; they shouldn’t be seen as a silver bullet,” said PKF’s Lee.

Other ways to attract talent include offering higher training allowances for fresh hires, or improving work-life balance with shorter working hours, he added.

SMPs can also provide opportunities for audit staff to experience other job scopes, such as advisory or sustainability services, said Fua Qiu Lin, divisional director for quality assurance and finance at the Institute of Singapore Chartered Accountants.

“As teams in SMPs are generally smaller, employees have more opportunities to be exposed to more varied work and pick up different skill sets,” Fua said.

Their smaller size also mean that SMPs can offer employees leadership opportunities sooner than larger firms can, she added.

To improve recruitment, SMPs can also reach out to current students and tap other sources of talent.

SMPs can work with schools to provide “meaningful and interesting work-study opportunities” to students, a spokesperson from the Accounting and Corporate Regulatory Authority told BT.

They can also tap existing measures that help non-accounting graduates and career switchers to enter accounting.