The accounting sector had the highest overall growth rate for bonuses this year in the professional services space, according to new data, with the average size of a bonus in accounting in small and midsized firms increasing 9.4% from $371 in 2021 to $406 in 2022.
The data, based on over 200,000 mostly small and midsized businesses using payroll and HR technology provider Gusto, found that in nearly all other professional services sectors, bonuses shrank. The three sectors with the largest bonuses — finance, technology and legal — were smaller than last year. Finance bonuses were 31% lower in 2022 than in 2021, while tech bonuses shrank 18.7% and tech sector bonuses fell 14.7%.
"What we saw across all professional services industries was a lot of economic uncertainty," said Gusto economist Luke Pardue. "Professional services firms were pulling back on their end-of-year bonuses. Overall, in professional services, we've seen a 17% decline in the average size of bonuses. That's led by the finance, real estate and technology companies that are dropping bonuses by sometimes as much as 30% or more. But we're seeing a different trend in accounting, where the average size of a bonus increased by almost 10%, from this November compared to last November, which tells me that despite a lot of the uncertainty and the slowdown in professional services in general, the accounting industry is still in the midst of a labor crunch, where accounting firms are struggling to retain and attract talent."
Wages in the accounting sector have grown 6.2% over the past 12 months, compared to 4.8% across other sectors, according to Gusto's data. Given the slowdown in employment growth, combined with faster wage growth, accounting firms will probably need to do more to retain and attract talent next year.
"It could be that these bonuses are moving into higher wages," said Pardue. "That may explain the decline in bonuses in some industries, but we're seeing an increase in the size of bonuses in accounting."
Bonuses across sectors in professional services
Overall employment among the companies using Gusto has grown 12%, but in accounting, it's only grown 8%. "If you put all these data points together, with the higher end-of-year bonuses and higher wage growth, but slower employment growth, that tells me that accounting is undergoing a bit of a labor shortage where firms are struggling to hire and attract talent," said Pardue. "A lot of other professional services firms are pulling back a little bit on their hiring plans or on their end-of-year bonuses. But within accounting, firms are still working hard to attract and retain talent."
In the meantime quit rates in the accounting sector have declined lately, according to Gusto's data, with fewer workers leaving their current firms.
"Employees are not churning as hard as they have been in quarters past or years past," said Will Lopez, head of evangelism at Gusto and a former firm owner. "In the accounting industry the quit rate is down roughly 36% in the last quarter, based on our data, and 27% year over year, which speaks to the fact that the accounting industry is trying very hard to attract and retain talent, especially to retain talent. It's going to be a lot more expensive to replace talent than it is to retain it."
He pointed to data from the latest
"College graduates in accounting continue to decrease year over year, and the profession is struggling a little bit with its almost workaholic kind of reputation," said Lopez. "That isn't attracting a lot of individuals and causing firms to go outside the traditionally trained accounting professionals. They're filling in talent from other industries."
Firms are making efforts to grow the accounting pipeline by recruiting more heavily from different educational and ethnic backgrounds.
"It really paints a picture of an industry that, like many industries, is going through an immediate acute labor crunch, but then also has a bit of a longer-term supply chain issue with the pipeline issue," said Pardue. "Right now they're working hard in the short term to retain and attract talent through bonuses. To a certain extent, it's working. With these bonuses and higher wages, they've been able to retain the talent that they have and add new workers, although at a slower extent. But the college graduation rate, or [accounting] major rate, points to some longer-term pipeline issues. In retail and leisure and hospitality, we're seeing business owners get creative resorting to other sources of labor, and we're seeing that in the accounting industry, too. A lot of them are searching for other types of workers to fill in those gaps right now. We might not see traditional growth in accountants, but firms will grow by tapping into other forms of talent."
Some firms are cutting back on holiday bonuses, however, as Ernst & Young's U.S. firm has reportedly been doing this year, according to the
"While some of the biggest firms in the U.S. treat employee bonuses and wage increases as discretionary, I think for every other firm retaining good talent is not discretionary but necessary," said Lopez. "Over the next year, firms are going to continue to pour [more] into their existing team members. They are going to lean on resources from their technology partners, and put a lot of focus on career mobility or upward mobility in existing team members, maybe team members who haven't taken on new roles, but by nature of their existing roles, are probably going to be stepping up into new roles."
