Stakes are high for firms playing salary rouletteby
In an overheated job market, it isn’t just rail workers who are going to want a pay rise that matches inflation. Talented accountants know their own worth as well, so getting the pay rise equation wrong could prove a costly gamble for practices.
As HM Government, despite the assistance of Network Rail and the train operating companies, is fast discovering, trying to get a good outcome on pay in a period of rampant inflation is akin to playing Russian roulette.
In some ways, the position could be even starker for accountancy practices, given that we have for some years been experiencing a labour market where employees have all of the bargaining power.
Currently, if you were to ask anyone running a firm about their most pressing concerns for the next 12 months, there’s probably a 90% chance that recruiting and retaining staff would come top of the list.
With good staff at such a premium, it is inevitable that boardroom conversations will be going on between partners as to the perfect balance between limiting pay rises and the costs if staff walk to competitors, in some cases potentially taking clients with them.
On the plus side, at least we are in an industry where we do not have trade unions itching for a fight on one side or Grant Shapps pulling the strings on the other.
While accountants might lose out on the simplicity of collective bargaining, to the extent that we have to face belligerence, at least it is likely to be from a handful of individuals who are convinced that they know their own inflated value. To be fair, some of them might be right.
The other difference between accountants and many of those in the public sector – certainly on the railways, in schools and in hospitals – is the possibility of working from home. This could enable us to finesse salaries against a more attractive work/life balance, that cuts costs for both employer and employee.
Even so, with CPI already running at 9.1% and rising combined with a hot market, it would be a brave managing partner who would advocate a pay freeze or trying to match the 2% offer (plus another 1% for improved productivity) currently being offered to rail workers.
That is without even considering our obligation to fulfil the ambitions of our prime minister, who has spent the early part of the year spouting on about a high-skill, high-wage economy.
There’s no question that our sector relies on high skills and by almost any standard, bar those of our own staff and partners, pays high wages. Even so, trying to get the balance right this year is going to be very tricky.
Tightening our belts
Generally, accountants have done remarkably well to weather the pandemic, although if a recession is coming then we may also need to tighten our belts. However, that will take quite some explaining even to the most loyal of employees.
With market competition, it is possible that even a 10% offer might not be enough to keep star performers, especially if inflation reaches or exceeds the figure that the Bank of England is predicting. One possibility might be to introduce or enhance bonus schemes, especially those that are connected to performance measures.
Even canny accountants tend to feel unduly grateful when they receive what might in reality be relatively paltry bonuses. To take an example, if someone earning £50,000 a year was awarded a bonus of £1,000, that might be very nice but it is still only a one-off increase on pay of 2%, with tax deducted at the highest marginal rate and NIC payable.
However, due to the whims of human psychology, most people receiving this will be far happier than if they received a 3% (in other words, 50% more) increment on their salary. Work that out.
Having spent far too long listening to rail unions and employers discussing productivity over the past few days, we may wish to bury our heads in the sand.
Realistically, it is quite difficult to see how most accounting staff can increase productivity in any measurable way. In addition, there is a danger that when they work longer hours the quality of output could diminish to dangerous levels.
There is no obvious answer to this conundrum other than picking a number, talking about future bonuses and holding your breath. Good luck!