We are still well underpaid and overworked.
Just run the math yourselves, billable hours times your billing rate. Don’t forget to take into account realization (I usually use 70% to be conservative). In most cases, firms are making ~3.5 times our annual salary per client-facing employee (e.g anuual salary of $100,000 means that the firm is grossing and collecting $350,000 in fees from clients directly attributable to your work throughout the year so they profit $250,000 after paying you).
https://news.bloomberglaw.com/financial-accounting/accounting-faces-reckoning-after-years-of-sluggish-pay-growth
Someone has to pay for partner pensions. Also benefits and other overhead usually account for another sizeable chunk in addition to salary. Point well taken, and we all feel underpaid, but this is a for profit business.
Agreed. Just think it would be great if there were more incentives to sell work or make extra money somehow for people who aren’t partners.
As an associate, the market rate at my firm is somewhere around $400/hour. Even with an extremely conservative realization of 60%, that’s $240/hour x 40hrs/week x 50weeks/year = $480k, which is more than 5x my salary…
You’re better to look at average realized rate. Depending upon the market you could be anywhere between 180-240 an hour for audits.
Rising Star
“According to Robert Half salary guides, average starting pay for first-year auditors in 2022 was $55,000—unchanged from 2011 despite 10 years of slow but steady inflation growth.”
This is what I think has been blatant taking advantage of people. An associate starting fall 2022 told me that their offer was for $67K whereas I started at $58K in fall 2019. Firms could have made changes a long time ago but would rather be reactive than proactive about taking care of their people.
Rising Star
The reckoning is here 💂🏽♀️
Chief
Yeah, it isn't just salaries. This OP's analysis if grossly deficient. Running a business has many more costs than just the people's salaries.
Rising Star
No one isn’t saying salaries aren’t the largest driver, but you’re naive to think overhead isn’t material and needs to be factored in. If you want something that runs lean like the point you’re illustrating, look at A&M. If you’re not going to factor it in, then don’t act like you’ve have solved the issues of how to operate traditional firm models.
I don’t understand why retired Partners are paid so much. Absurd to be paying huge pensions to people who aren’t working for decades while staff is ground into the dirt
It’s essentially their buyout. The built up a business that will more than likely produces good cash flow after they are gone.
Chief
The real question is, why can't we bill more for our services? Discuss.
“Run the risk of losing business” is good theory but in practice, it does not happen. Most companies absolutely hate switching auditors. Its a tiring process and crushes staff and senior accountants that have to explain to new auditors knowledge and information that the previous auditors had.
I worked for a firm for seven years. As a manager, when I realized some of the engagements we were doing did not have good realizations (less than 100%), I pushed the partners hard to raise the clients fees. I gave them a point by point breakdown of why we should raise (even prepared a slide deck with full transparency to the client). The partners thought it was a good idea. We scheduled meetings with management to communicate to them that we would need to raise fees at least annually by inflation plus to make up for any poor realizations due to them. I never had a client walk away at any of the partners I worked with. Some management even appreciated the breakdown and transparency. They were also much more receptive to work harder to meet our schedules/deadlines for document requests to gain efficiency.
Show your math. Would be interested in how much you actually think was made. I do well, but wish I was making $250k per staff!
Big 4 generally has really high hourly rates and really low expectations on realization. So it’s hard to compare solely on realization %s. My overall realize is in the 90s and I either raise rates or find somewhere else to go for my low realization clients.
Had a similar thought. Could make more as an uber driver for the hours we work.
For how long? Do you only think about the current year you are in?
Pro
I’m not a partner - but these posts are laughable- if you think you can sell business like a large firm without the backing of money and resources on the back end - good luck. The projects you senior/manage are on are won by a entire firm initiative.
Please, take a basic course about business. Accounting firms are not “profiting $250k after paying your salary”. There are a million other costs that go into running a global accounting firm that aren’t chargeable back to clients.
The point that is being made still stood on its own merits without this incorrect statement.
Part of the reason salaries have remained stagnant is because there is a massive pool of accountants overseas willing to work for less. To tap into that pool of cheap labor, that’s why offshoring has become a bigger part of audit and tax engagements. If an offshore staff is half as productive, but is only paid 1/3 as much, firm management sees that as a win
Yeah, and they get the knowledge and training that US based staff get with the same infrastructure. There is absolutely no reason that this should be free. The infrastructure and opportunity should not be free. They should be taxed, aggressively, for these practices. Similar to tariffs on goods on competitor countries so that companies are inclined and incentivized to hire and pay well domestic employees.
Accounting salary is bad and behind. When you can make a lateral move for 20% increase, just shows how much underpaid you are in the current company
I mean, if you’re not even going to include fica tax withholding or the cost of providing insurance in the cost to employ somebody, why should I trust anything that you calculated?
While I agree we are underpaid (the industry is as a whole). Keep in mind that even if your math is correct at 250k. A bulk of that 250k is being spent on benefits, tech/tools, guidance, marketing, etc. Try auditing without any pwc guidance, without aura, etc. If it were easy people would be branching out and stealing big4 clients left and right
It used to broadly work out as 1/3 for salaries, 1/3 for overheads (offices, insurance, IT, investment), and 1/3 for partner profits.
What’s the ratio now?
Chief
For being a manager your math and conclusion about the “profit“ seems pretty shoddy.
Please, enlighten us Chief
1. I agree with you that Partners and retired partner pensions are egregious compared to the general workforce
2. This ignores payroll tax, benefits, support staff, and rent per billable employee
I was paid 52k for 2 years without a raise and thank god I was given a chance in big 4 with decent salary now. Big 4 makes big money but at the cost and I am happy with what I make. It’s not possible to make those salary outside the big 4 (public accounting) for sure.
What's great is when you work in Tax and about 95% of your time is on Time and expense engagements. Plus I handle mostl billing (one step or another) so I know exactly how much we are charging (and getting from) the client for my time.
It's usually a depressing activity. It also why if I do have a slow week (rare, but does happen) I have no issue charging some admin code and only have 20 hours of chargeable time.
@Ey5
Almost all of my engagements are T&E.
So if we have 287 hours in the code for the billing cycle, we charge the client 287 hours at the rate card in the SOW (or general rate card we have with the client) at the hours by rank.
To determine how much I bring into ey, margin/eaf etc do not matter in the calculation for me. I've only really ever seen partners not charge time for time the partners charged themselves.
I also do about 50-100 hours yearly on compliance (fixed fee?) Engagements, and have no insight into that, but normally dont include this amount when i think about how much revenue i directly bring in.