New Hire Compensation Question

My firm has experienced very steady growth over the past ten years and until now I have done everything on my own. With significant growth in 2020 I finally need to hire a staff accountant who can help in all areas. I have looked at all the salary guides and various sources to try and get a feel for what I should offer but I have one item I can't find the answer too, which is overtime.

When I started in public accounting in 2010 the firm I worked for paid a base salary plus overtime. OT was expected to be 40-60 hours/week during audit/tax season. After my first year they changed the compensation package to no longer pay OT and simply raise base salaries accordingly. Apparently they hired a firm to research this and they said that was the trend.

Are most CPA firms still paying OT (1.5x) or are base salaries expected to cover the additional 500+ hours an accountant might work Jan-April? I will not be requiring my employee to work any OT so this is really just to make sure I can compare to the data that is available.

I've worked at three CPA firms since 2013 - two small (~10 employees) and one top 25 CPA firm. The small CPA firms had a base salary + end of tax season bonus. The bonus in my experience has ranged from 5%-10% of base salary. The large CPA firm did not pay bonuses to staff below manager - everything was part of base salary. All firms have been 55-60 hours a week during tax season. None of the 3 have paid 1.5 OT. That's something I wouldn't expect for salary employees.

One other incentive the small firms have had is additional time off in slow seasons. For example - Fridays off from April 16-July for year round employees are a great motivator. Nothing worse than being in the office and bored with busywork.

FWIW. We are a firm of about 35 people. Our salaried staff do not get overtime pay. The salary includes the expected additional tax season hours. We have hourly employees, too but they are part-time so overtime is not an issue.

working 60 hours a week during tax season without any additional compensation (bonus or OT) is a recipe for disaster with your personal relationship. A good friend of mine was about to break up with her BF(class mate of mine) because of that. I had to talk her out of that. Finally the BF had the courage to demand a better compensation deal or he was going to quit and start his own practice!

working 60 hours a week during tax season without any additional compensation (bonus or OT) is a recipe for disaster with your personal relationship

I agree. But based on my own experiences, the two pieces of anecdotal evidence above, and data I have found online, even with additional compensation the hourly rate still comes out a bit lower than you deserve.

I ended up offering the position to someone with three years of experience for $53k plus expected performance bonus (although the amount was not disclosed, I plan on between $3-5k). I am not expecting OT which is why my salary is a little lower. The trade off in salary is more time off, no OT, no weekends.

Finally the BF had the courage to demand a better compensation deal or he was going to quit and start his own practice!

He's going to start his own practice because he wants better work-life balance and higher compensation?

I ended up offering the position to someone with three years of experience for $53k plus expected performance bonus

Based on your work flow what percentage of time do you expect this person to "actually prepare" a tax return vs. other tasks such as review, accounting reconciliation etc.

IMHO if 80 or 90% time is on actual tax return preparation, then a person with experience may look elsewhere next tax season. Just before tax season I see a lot of hiring ads with guaranteed bonus and high salary for experienced accountants.

For staff (non tax prep), I generally base their compensation on market analysis of my area plus the bonus in addition to personal performance is tied to the overall profitability of my business. A few years back I suffered a downturn due to personal reasons and I could not pay any bonus.

Based on your work flow what percentage of time do you expect this person to "actually prepare" a tax return vs. other tasks such as review, accounting reconciliation etc.

Rough estimate is 40-50% tax prep.

a person with experience may look elsewhere next tax season. Just before tax season I see a lot of hiring ads with guaranteed bonus and high salary for experienced accountants.

The problem with this statement is that every tax firm I have ever heard of (assuming full time employment and not per diem) requires overtime and weekends. Clearly I am looking for someone where dollars is not the most important thing but hopefully I can offer a reasonable and somewhat competitive salary.

BFStax, I find your final paragraph at #8 interesting. I think the key here is to be consistent. I had one employer who, it is now obvious, struggled for cash. Even in tax season, he limited my hours. I strongly suspect this was based on his projection of cash available to pay wages. I do not object to being told not to do overtime (one employer, years ago, did that during tax season). However, being told when to do overtime based on the firm's cashflow was frustrating.

BFStax, I find your final paragraph at #8 interesting. I think the key here is to be consistent. I had one employer who, it is now obvious, struggled for cash. Even in tax season, he limited my hours. I strongly suspect this was based on his projection of cash available to pay wages. I do not object to being told not to do overtime (one employer, years ago, did that during tax season). However, being told when to do overtime based on the firm's cashflow was frustrating.

I think I understand what you are saying and agree. But in my firms situation, it is not about cashflow. Rather, I don't want my employee working overtime because that is not the culture I am growing. So I won't be saying to work OT one week and the next week no OT because I can't afford it. So that is going to be consistent on my part.

I am trying to find a salary that works for me and the candidate. How I have been doing that so far is comparing at an hourly rate. For example, take a salary of $70k (no bonuses or benefits for the sake of simplicity) with expected full time hours of 2,080. Add on top of this 300 hours of OT. I have seen OT hours much higher than this, sometimes close to 700, but for a staff usually lower in the 300-400 range. This means total hours of 2,380 which equates to $29.41. Compare that to a salary of $62,000 but no OT and the hourly rate is $29.81. I get that dollars are important to live and pay bills, but many people may be willing to take a paycut to work fewer hours with less stress.

I get that dollars are important to live and pay bills, but many people may be willing to take a paycut to work fewer hours with less stress.

How old is this fellow that you hired? I can tell you that younger people want OT and if they don't get that on a consistent basis they are looking elsewhere. In my younger days with a growing family it was OT that bailed me out, without OT I would have been scraping in many years. Now with an empty nest, I don't care about OT.

I guess you have to find the right person for that position. If you get the wrong one, life will be miserable for both of you.

I can tell you that younger people want OT and if they don't get that on a consistent basis they are looking elsewhere. In my younger days with a growing family it was OT that bailed me out, without OT I would have been scraping in many years.

This is inconsistent with what others have said in that nowadays firms don't pay OT. The extra hours are part of your salary. So I ended up making an offer, and it was countered and we agreed on a revised offer, which ended up close to what market rate is. This person understands the trade off for a better life balance. Now, in one year will they still be happy? I hope so!