Lee Owen, Director at specialist recruiters Hays Accountancy and Finance, told ICAEW Insights that since the New Year, the appetite to hire across the accountancy and finance sector has continued to increase, and skills shortages that existed pre-COVID mean employers are struggling to find the talent they need.

“Wage inflation is increasing and is driven by a heightened number of vacancies in the UK – and a reduction in candidate availability. Candidates are still not as confident in moving as they were pre-pandemic and there has been a reduction in professionals returning to the EU either as a result of Brexit or COVID-19,” Owen said.

Owen predicted that salaries would continue to increase as long as demand is high and supply is low, and he urged organisations to recognise that often it is more cost effective to retain their best talent and invest in training, rather than trying to replace staff like for like.

John Thistlethwaite, a finance & accountancy consultant at recruiter Sellick Partnership, said the competitive nature of the finance and accountancy job market was forcing many employers to look for new ways to keep their employees on side including additional benefits, increasing salaries, and offering quicker career progression. “This, combined with the pandemic making many candidates more risk-averse, has resulted in many quality candidates being unwilling to consider leaving their current position,” Thistlethwaite said. 

Not only are the salaries on offer inflated, but we are also seeing some prospective employers use aggressive tactics. Some are also willing to pay above the market rate to attract the right candidates as well as a counter to retain current employees. “At every level, we are seeing candidates receive salary offers that significantly exceed what would have been considered competitive 18 months ago,” Thistlethwaite added. As a general rule, employers should expect to be paying between 5% and 10% more for a highly qualified candidate in 2021 versus those in 2019, he said. 

While undoubtedly an important factor, it’s clear that salary alone will not secure the best candidates. “For any business looking to expand their finance team, I would advise them to really consider the whole package and to think about what should be shared with candidates from the outset to make their business stand out,” Thistlethwaite added. Softer benefits such as a generous pension, car parking, gym membership, the company culture and values could prove to be a deciding factor for many employees, he added.

In addition to being aware of the higher salaries, candidates are becoming increasingly concerned about the package on offer. Hybrid working and flexibility around working hours are higher up the list of candidates’ requirements than ever before. 

“As a general rule, we are seeing that salaries are most inflated when the organisation is unable to offer the softer benefits that employees are looking for. It is really important that employers do not underestimate the value of the other things they can offer a candidate,” Thistlethwaite said.

For businesses looking to recruit ACA-qualified accountants, Thistlethwaite warned that making job offers to good candidates quickly would stand employers in good stead. “My biggest piece of advice would be to streamline your recruiting process as much as possible and stick to agreed time frames. At the moment, with strong candidates receiving between three to four job offers, time really is of the essence.” 

But whatever you pay, bear in mind that too large of a pay gap between executives and the employees of a company negatively affects employees’ morale and could have a damaging impact on the firm’s performance, new research by Durham University Business School has found, although the study also found that higher executive pay relative to employee pay could also encourage executives to work hard to improve corporate performance.

The research was conducted by Laurence Ferry and Guanming He, Professors of Accounting at Durham University Business School, together with Chang Yang, a visiting academic of the Business School.

“Compensation is an essential issue for corporate governance as it influences the performance and growth of a firm. However, offering executives the right level of compensation is a tricky balancing act,” Professor He said. “On one hand, it acts as an incentive for talented executives to further contribute to firm performance, but on the other hand, it can negatively affect the employees’ morale, dedication, and creativity and thereby lower the productivity and performance of a firm.” 

“Ensuring that all employees have an appropriate salary will help a firm to build a harmonious organisational culture, which is more likely to ensure the company performs effectively,” Professor Ferry added. While the pay for executives to incentivise them to serve their company better is crucial, it is also crucial to lift the pay for all employees as well, the researchers say.