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Money: Still a thing, Part I
For many years, employers lured candidates with large salaries. As large as they could afford, anyway. The idea being that if you pay people a lot—relatively speaking—they will work hard for you. Most people, that is. When Peggy Olson complains about not getting credit or gratitude for her long hours or ideas, Don Draper doesn’t bat an eye: “That’s what the money is for!” he barks.
These days, even pre-pan, many employees don’t tolerate being treated poorly, even if the money is good or really good. There are countless employers that will pay well, pick up the health insurance premiums, throw in unlimited PTO, offer infinite perks, good snacks, and coffee, and be nice about it. The trend now is you can’t just throw money at people.
But that doesn’t mean money isn’t important. In fact, it may still be the most important thing to attract would-be employees. It’s just that employers might have to think about not only salary or wages but also raises. This is especially true in a job market where employees are quitting at the drop of a hat. So here’s what a few companies are doing:
The demand for U.S. workers has led some manufacturers, technology firms and other employers to ditch the annual raise and switch to more frequent pay reviews as they compete for talent and keep pace with rising wages.
It makes sense. I don’t know if you’ve noticed, but the past two years have felt like 20. If you’re an employer that’s only revisiting your employees’ pay once a year, I can’t help but wonder how many employees you’ve lost.
Still, not that many businesses are ditching the annual raise:
In a January survey by the consulting firm Mercer, roughly half of respondents said they didn’t plan additional reviews or salary increases to address inflation this year, though nearly a quarter said they were considering it. Around 20% of respondents said they plan to review off-cycle salary increases as needed in 2022. Only around 6% of the 2,565 human-resources managers who responded said they had decided to review compensation two or more times this year in response to rising prices.
If you’ve been reading this newsletter for a while, then you won’t be surprised to hear me suggest that accountants should advise their clients to have more frequent pay reviews for their employees. Much like proactive pay transparency, broadcasting something like, “compensation reviews after six months,” can put businesses at a distinct advantage. People looking for a new job will know: a) what they’ll be making and b) that there’s at least a chance that they’ll make more in the near future.
For now, businesses that take this approach will be in the minority; they’ll likely attract more candidates, giving them a better chance to hire more workers, and with any luck, they’ll increase revenue. Then, among other things, they can pay people more. And pay them more, more often. Maybe that’s what the money should be for.
Money: Still a thing, Part II
Elsewhere in the same article, this is what non-Big 4 accounting firms are up against:
The consulting and accounting giant Deloitte LLP typically raises employee salaries once a year, over the summer. Executives at the firm realized last fall they couldn’t wait that long to adjust compensation again. Deloitte U.S. conducted an additional pay analysis to study wages for its 120,000 employees, ultimately raising salaries for thousands of its employees at the end of 2021.
The surprise increases were aimed at keeping Deloitte’s pay competitive in a labor market where wages were rising quickly, said Joe Ucuzoglu, chief executive of Deloitte U.S. “Clearly, there’s upward pressure,” Mr. Ucuzoglu said, noting the firm made “adjustments where the market had moved.”
As I’ve mentioned, I spent a good portion of my career covering accounting firm compensation, particularly at Big 4 firms, and I can tell you, this is not a small thing. A firm like Deloitte isn’t giving employees an off-cycle pay raise out of magnanimity. Same goes for KPMG (full disclosure: I used to work there). They’re throwing money at people because they’re desperate to keep them, and this is the best way they know how to do that. (Oddly enough, it’s the best way they know how to get people to take time off, too.)
Anyway, these tactics from Big 4 firms are a problem for the other 99.99% of accounting firms out there. Not that competing with them for talent has ever been easy, this is just one more maneuver to contend with. It’s just that this involves money, and that’s where non-Big 4 firms are at a distinct disadvantage.
Fresh from Gusto
Facing an accounting talent shortage? Just ignore it. No joke—learn to train or attract all the talent you need by investing in your team and tech. In Gusto’s new playbook, we share a series of plays you can run to train or attract all the talent you could ever want.
- ICYMI from Amber Setter: Three Toxic Accounting Behaviors to Quit This Busy Season
- From my colleague Jaclyn Anku: How to Nail Your First People Advisory Consultation
- Everything you need to know about reasonable accommodations.
- How to Sell People Advisory Services with Gusto & Practice Ignition with Will Lopez, Josh Lance, and Ryan Embree on February 28.
- 401(k) and Tax Benefits for SMBs with Nicolle Willson of Guideline on March 2.
- The Ultimate Guide to Leveraging a Software Vendor’s Accountant-Partner Program with Will Lopez on March 9.
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Empower your team with Gusto’s training programs built with accountants in mind. Get People Advisory Certified to build your skill-set (5 CPE credits). Enroll in the People Advisory Accelerator Program to grow your firm’s revenue (4 CPE credits).