We have been hearing from firms since the last quarter of 2021 of the difficulties they are experiencing in attracting and retaining personnel, as well as the expectation of staff for more significant salary reviews, particularly amongst the Eastern States. This seems to be on everyone’s lips based on the number of questions we are receiving on this topic.

We know there is a significant shortage of personnel, particularly through the more senior ranks. Long gone seems to be the acceptance of the old 2.5% or 3% salary review. However, the danger here is how this is going to hit the margins and profitability of firms. We already find salaries up around or beyond 40% of firm revenue. We know hours charged and the recovery rate of salaries are below desired levels. So how are we going to support these requested increases? Will firms risk losing staff by not meeting these demands? Interestingly, time will tell whether we have the reverse of what we saw in the mid 2000’s where staff may now be poached back to the Eastern States from firms in WA on the promise of more attractive pay? With finite resources, something will have to give.

According to a survey performed by Seek in the last quarter of 2021 and recently released, 8,700 accounting jobs are currently listed for a range of positions, up 33% year on year. However, fewer people are applying for roles. Apparently, the key drivers to attraction when accepting a job include, in order of importance, salary and compensation, work / life balance, career development, and less importantly job location and organisational culture. Far less important according to Seek was the firm size and reputation, its corporate responsibility or co-worker traits. So, despite prior comments from HR experts and the like that remuneration is not the top factor of importance to employees, this would now appear to be the case, money is king.

Thus, where does this leave us as proprietors? In some potential trouble I would suggest. This is a very dangerous game to play. Individual personnel approaching practice owners requesting / demanding significant pay rises. If this is not granted, will the staff member stay, probably not. If the firm agrees to the review, will other personnel find out and also start requesting similar increases? If granted, what does this do to firm profits? Unfortunately, it’s simply not possible to increase fees to clients by 10%, 15% or 20%, particularly for some industries after the past couple of years. The problem also is, if employers agree on this occasion, what stops the staff from approaching their next review with the same expectations. I have always believed that retention based on significant year on year salary increases will only ever be a short-term game. A ceiling will come for all staff where significant increases beyond a certain level is simply not possible or commercial, and other alternatives will need to be found.

Hence, if firms agree on this occasion, I suggest that you start planning to recruit similarly qualified personnel, so when the expectation comes around again, the firm is in a position to say no and be okay with that staff member leaving for other pastures.

Perhaps some other alternatives would be to consider outsourcing or offshoring where such services are not currently being used. Now, there are a couple of potential issues here. Some firms avidly believe in keeping jobs here, local to their firm. Other firms have real concerns about sending their clients data to parties in other countries. The difficulties around having these conversations with their clients. Others have tried outsourcing services and have yet to find the options or provider that works best for them. Others, often regional, have simply had no choice and had to proceed down the outsourcing path due to the lack of ability to recruit.

Another approach, where more significant increases are granted, is to also match such rises in expectations. That is, if the staff member wants to be paid X, then these are the new / additional expectations and tasks that accompany that level of remuneration. This will hopefully increase productivity, release the practitioner or other staff to perform higher level work, and partly ease the load somewhere else within the firm. However, where better performance is unable to match the new level of remuneration, the firm will need to think long and hard about the retention of such personnel.

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