By far the most popular newsletter we send out each year is this one – a review of salaries and compensation for tax professionals in Colorado. While I love sharing my knowledge of the tax employment market, putting together a nice little salary chart is very daunting. Trying to give a compensation range for a certain level of tax experience is like trying to give a price range on a certain type of car (compact, sedan, pickup, etc). There are just so many variables in determining what a person’s salary should be that it requires me to use rather broad ranges based on title and years of experience. And while it may seem that title and years of experience are directly related to compensation, we all know that isn’t always the case. The other piece of what makes this difficult is the struggle to quantify soft skills. Ambition, communications skills, emotional intelligence and confidence are just some of the things that can affect compensation. Just how much does an employee with a high level of confidence cost in today’s job market?
Employment Market for Income Tax Professionals
As we all know, hiring and staffing for tax is, in part, seasonal. It certainly is for public accounting firms. And to a lesser degree; it is in industry (corporate tax). This time of year most public accounting firms are just starting to think about their staffing needs going forward. They typically aren’t in any rush to get people on board but their sense of urgency increases as the year moves on. Corporate tax departments, however, are more consistent in their hiring throughout the year but usually find their needs increasing as we head into the summer months which tend to be busy with compliance work. As I write this newsletter, there is a strong demand for Senior Staff and Manager level candidates (no surprise). What we are seeing, though, is that most employers are still trying desperately to find and attract a particular pedigree of tax professionals that have Big 4 experience, a CPA, advanced degrees (Master’s in Tax or Accounting), steady career progression and that are still early in their career (yep, I just said it, they typically want younger candidates). Demand being what it is, there are plenty of opportunities for candidates without these credentials, but salaries are sometimes not as high and they may not get their first choice of firms or companies.
We have continued to see a steady increase in hiring year over year since 2010. This corresponds directly with the average growth that many public accounting firms have seen. As a result, organizations are faced with not only retaining the employees they have, but filling new positions to accommodate for this growth. This is good news for people looking to make a job change. While unemployment has slowly decreased in the Colorado job market, workers with a 4 year degree and at least 2 years of experience are in especially short supply. I estimate that unemployment among tax professionals is probably about 2-3%. That means that employers have to offer competitive salaries and other benefits to compete for the small supply of eligible candidates. More and more companies are offering creative compensation plans, promotions, professional development opportunities, flexible work arrangements, fun office perks and better work-life balance in order to attract and retain the best employees. Work-life balance and flexible work arrangements are still the most sought after benefits according to the hundreds of tax candidates I talk to each year.
While Colorado has seen some phenomenal population growth, other than Arrow Electronics and Charles Schwab, we haven’t seen a significant number of tax departments starting up or moving to town. In fact, we’ve probably had a net loss in corporate tax headcount as we lost some people to mergers and lay-offs, most recently in the oil & gas industry. Most of the population and economic growth has translated into increased headcount for local and mid-market public accounting firms.
Another interesting note is that the quit rate has leveled off, even though unemployment has remained low. The quit rate is the number of employees voluntarily leaving their job for another opportunity; which is, in part, a measure of consumer confidence. The quit rate hit a low at the end of 2009 but had been steadily improving until recently. This could mean people are concerned about ongoing economic growth and job stability and are tending to stay put rather than risk making a job change and being the most recent hire and, potentially, the first person to get laid off (LIFO).
One other thing to note is that most college graduates that start with the same firm or same department are usually getting the same pay, as long as they have similar credentials. That parity continues as long as they stay with the same company and progress at the same pace. Research shows, however, that people make the most money when they make periodic career changes between employers. I find that kind of ironic because most employers would agree that it’s in their best interest to keep their employees. So why not pay them accordingly?
Show Us the Money
Compensation for tax professionals can vary for a number of reasons, like location and size of the company or firm, industry and company financial performance, compensation trends within the company and even perceived desirability of employment opportunities with the organization. Even in Colorado and Minnesota, where Oxford Tax Recruiting does the majority of our business, I’ve seen salaries for the same position vary greatly between downtown areas, suburban business parks and more rural locations. Throw in the other factors that affect compensation and the pay range for similar positions gets pretty broad. That being said, I have offered up information based on current and past hiring trends from over 45 different companies and public accounting firms throughout Colorado. These numbers are not reflective of bonuses and other incentives and presume that the candidate will have at least a Bachelor’s degree in accounting or related field. The salary curve is just what you would expect. The increase is most pronounced early in an employee’s career and then tapers off. While many companies are offering 3-5 percent annual increases, tax professionals can usually expect to see increases of 5-15% when changing employers or getting a promotion.
2015-2016 Salary Ranges for Income Tax Professionals
We have seen a definite increase in salaries this past year but many would argue that compensation is still lagging behind the increased cost of living, driven primarily by higher rents. Public accounting firms seem to be more competitive than they used to be, but they still have a difficult time offering the work-life balance that many candidates seek. Even amidst lay-offs, oil and gas continues to be an industry that is constantly pushing the compensation envelope. However, there are only a handful of larger oil & gas companies headquartered in Colorado and thus only a handful of these tax departments. A new trend I’ve seen some of the larger public accounting firms offering in an attempt to retain talent is early promotions. The net effect is to get employees a higher salary sooner.
One other thing to keep in mind is that while title in some way reflects years of experience, it is a little more nebulous relationship in industry and smaller public accounting firms. I work with candidates that have a Senior Tax Analyst/Associate title that have over 20 years of experience and are making $80-100K. I see this occur most often in larger organizations where tax people don’t have the opportunity to advance, or choose not to do so. Some companies we work with simply do not use conventional titles. Tax Accountants at places like this might be doing the work of a “Senior Tax Analyst” or “Tax Manager” somewhere else. Although title isn’t usually a primary consideration when making a job change, it tends to be a bigger issue for people early in their career that see themselves as working hard to get to the next level.
This salary information is meant as a guide. If you’re unsure about what you should be getting paid, I am always happy to share specific thoughts given a specific situation. I am also happy to provide information on compensation for indirect and operating tax positions. As always, I will continue to keep you informed of other changes in the Colorado tax employment market as they arise.