Drop in starting salaries for newly qualified accountants

Despite a shortage of candidates, newly qualified accountants are facing an unexpected salary dip when first entering the workforce with salaries down 10%

Over the last year, starting salaries were 10% lower than anticipated, highlighting a large disconnect between young professionals’ salary expectations and reality, found research by specialist accountancy and finance recruitment firm, Wade Macdonald.

While typical 2023 salary increases have ranged from £3,000 to £5,000 for roles across the board, trainees and part qualified roles have only seen an increase of around £1,000 since last year.

After years of training, many newly qualified professionals are refusing to accept a salary below £50,000 to £55,000, but the typical positions that these individuals will be filling have seen a 10% drop in salary since 2021.

This follows the significant wage inflation of 10% to 15% seen during the pandemic, when these professionals were training. But, by 2021, salaries had returned to previous levels and employee sentiment clearly has not followed suit. Internally the average salary increase for accountancy jobs in 2023 was between 4% and 6%.

This salary drop has shocked many newly qualified professionals, particularly due to the high cost of living and inflation pressures, and may even dissuade some from entering the accountancy workforce altogether.

Despite the squeeze on salaries, there has been significant demand for individuals pursuing professional accounting qualifications and those specialising in payroll, the Wade Macdonald research found.

Newly qualified accountants with technical skills are still in very high demand, as many part-qualified professionals are trying to escape that route into more business partnering or commercial roles. There is also strong demand for data analysis skills as organisations focus more resources on how to use the huge data pools available to them in a commercial manner.

Although salaries have continued to show a moderate increase over the past year, the rate of growth has not matched the levels seen in 2022-23. 

For entry level jobs after qualifications, the salary range for accounts payable managers was £40,000 to £65,000, while assistant accountants should expect to earn £32,000 to £45,000 and accounts assistants £28,000 to £35,000.

Part qualified accountants can expect to earn a typical £40,000, rising to 46,500 for those who are fully qualified with management and financial accountants being paid an average £60,000.

One area where there is strong growth in salaries is tax where demand for staff continues to grow. Wade Macdonald said this was driven by SMEs reaching a point where they require their first dedicated tax specialist, coupled with larger multinationals expanding their workforce. Considering the existing shortage of skilled professionals, the increased demand has intensified the upward pressure on salaries. An average salary for a tax manager is £75,000, while a VAT manager can command £80,000.

On the benefits front, flexible working was the most popular with over 75% of businesses offering this to employees, followed by contributory pension and bonus schemes. The least valued benefits were season ticket loans and bike to work schemes. 

Only 14% of those surveyed worked in an office five days a week, while nearly one in four (24%) worked in the office twice a week, and 18% did classic three days in, two days out. 

There are significant staff shortages in payroll where skills shortages are particularly pronounced, especially when expertise in managing payroll across multiple countries is required. The trend of organisations bringing payroll functions in-house has continued, leading to a notable rise in interim and project-based roles focused on reviewing payroll systems and processes.

Despite the need to fill these positions, salary offerings in this area are falling at the lower end of pay ranges, while more commercial and business-related roles now boast much higher salary averages.

Chris Goulding, managing director of Wade Macdonald, said: ‘If there is anywhere leaders should be investing, it’s in their people. Talent will vote with their feet – if they feel they aren’t getting the renumeration and support they deserve, they will move on.

‘But offering inflated salaries to newly qualified professionals that businesses can neither afford nor sustain isn’t a conducive way to retain top talent in the long term.

‘The key is to be realistic and open about what is possible at a particular time for the business, and if other benefits and opportunities for progression are offered, then the candidates may consider this a reasonable exchange.

‘It’s vital that there is an open dialogue between employers and candidates. Employers need to be understanding that, at a time when everyone is feeling the pinch, newly qualified professionals will be seeking a fair salary to reflect their years of training and meet their needs, and their expectations will be based on the higher salary rates of previous years.’

Dominic Wade, recruiter and co-founder of Wade Macdonald, added: ‘While people do value salaries and bonuses, they also value flexible working, learning and development, and a clear path to progression. By offering benefits in training and wellbeing, employers can help to mitigate some of the damage done to newly qualified hires by an unexpectedly lower salary rate than previous years.’

The Wade Macdonald 2024 Salary Guide surveyed over 850 finance and HR professionals.

Sara White |Editor, Accountancy Daily

Sara White is editor of Accountancy Daily...

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