Big 4 Starting Salaries – The Facts

I have noticed quite a few searches for “starting salaries” leading to this blog. It’s the season when you’re getting offers and you want to know if they’re true and fair and competitive. You need to start planning how to pay off those loans. You want to gloat over your fellow students who studied liberal arts or who teased you for worrying so much about your grades.

Well, in the tradition of the WSJ Law Blog and their open disclosure of salaries for first year law firm associates, here you go.

I received quite a few responses to my research request before the holidays that included detailed information about starting salaries. I also had quite a few respondents that had received offers from all four firms, or at least two or three. That, and my previous experience and knowledge of how the firms work, allowed me to come to this non-scientific conclusion:

There is informal, if not formal, collusion on the part of the Big 4 firms, with cooperation of the accounting professors/schools, to fix starting salaries and give the students no chance to negotiate if they have special experience, skills or circumstances.

That sucks!

The following numbers are based on my very limited sample and my experience and are for students with Masters in Accounting. For undergrad, subtract US$ 3-5,000. The numbers are applicable to the East and West Coasts of the US, where salaries and cost of living is higher. For the Midwest, subtract US$ 5-7,000 on average.

For Canada, I’m not sure what the story is, but I’ll tell you what it should be. If there’s no exchange rate difference now, you guys should be paid comparable to your US colleagues.

One of the big complaints of the Master’s students is that they spend a lot of extra money to get the Master’s, sometimes in order to get enough hours for CPA requirements in certain states, but the salaries are not really significantly different from undergrad to pay for the extra time. They all start as 1st year staff anyway.

As you can see, these salaries all hover around a total package of $62-65,000, salary and bonus, with different mixes of salary and bonus offered to make any particular student feel special. There are regional and potentially office differences. I promise to update or adjust as you, the reader, provide more data.

Should you try for a bigger salary or a bigger bonus? If you have the choice, and that’s a big if, I would take the cash up front, even with a payback requirement for not staying the year or two commitment they require. A higher starting salary pits you at a higher salary compared to your peers and means lower raises later, assuming you all do equally well. You’re going to stay within a range, from a base salary perspective, for a while. Any base pay differential evens out over time. The raises for employees with grad degrees are often a smaller percentage – even though the actual RAISE might be bigger the first year or two, it’s because it’s calculated from the bigger base salary.

So always take cash up front! (If they lay you off after the first year, they won’t make you pay it back…)

Then there’s the overtime issue. We’ll have to see what comes out of all these lawsuits. But I hope it is justice.

EY: $60k + $5k bonus (1 year commitment) + 15 vacation days (10 firm holidays) + $1k relocation reimbursement after acceptance of the offer.

KPMG: $58k + $4k bonus (1 year commitment) + 25 paid vacation, relocation “bonuses” also available
PWC: $59k + $3k bonus (2 year commitment) + 15 paid vacation (10 firm holidays)
Deloitte: $57k + $3k bonus (2 year commitment) + a lot of vacation/holidays
123 replies
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  1. Chicago Staffer
    Chicago Staffer says:

    I started with a Big 4 firm in Chicago last year and what Francine posted was pretty close (maybe take 2K off) for each Big 4 firm in Chicago. As we all know starting salaries aren’t moving up this year.

  2. Chicago Staffer
    Chicago Staffer says:

    For those of you in Chicago that have the opportunity to work for Crowe – they’ve been starting at $65K which is the highest paying firm in the Chicago area. However, they’ve significantly pushed back start dates.

  3. Anonymous
    Anonymous says:

    anyone know the big 4 salary ranges for first year managers in the midwest? (minneapolis, chicago, KC, etc)?

  4. Anonymous
    Anonymous says:

    First year KPMG senior here in Metro practice.

    From what I’ve gathered they aren’t going to offer sign-on bonus to interns/first years any longer at KPMG. For me, this was $6,000 gross and was my bridge from grad school to first day.

    First year was $57k, with the $6k bonus
    Second year was (is) $62k with CPA bonus ($3k)
    First year senior looks like $65-67k, depending on if there is a merit increase (we get 5% promotion raise)

    Kinda sucks my billing rate greatly increases from year 2 to year 3 and I will get a measly 5-7% increase. But friends at PWC in the NYC-metro area did not get merit increases for next year.

    The 25 personal days has turned into 22. You are forced to take certain days off during the year. And if you liked accruing vacation time, KPMG cut the hours you are aloud to carry over. In addition, the 401k which was the best (75% match) is now standard fare. This resulted in about a $2k cut on my part because I contribute to the max.

    In terms of having seniors with 2-3 years experience supervise work, I agree that managers have to be involved. Smaller jobs can go well, but there is no way IMHO that a 23-26 year old with limited experience should be the in-charge on a public/SEC client!

    Problem is that a first year manager right now can only be pulling down $80-90k which is peanuts compared to the work/hours they (generally) put in. There is such a huge gap b/t managers and partners. But, I also understand that managers don’t risk capital investment (although they are pretty much as liable as anyone in terms of litigation) like partners do. I’m not sure where the partners are (on the golf course??) but very few are involved with the engagement team. I trust it’s like this at other firms.

    We have had 6-10 seniors leave in AUG-SEPT so far in my office and they are getting jobs in private industry. I’m simply waiting for IFRS training/experience to move on.

  5. Anon 1970
    Anon 1970 says:

    @41 – you are incorrect on two points – first years have only been pushed back 1 month – they will be trained mid October – plenty of time to be ready for busy season. You are wrong on bonuses.

  6. Anon
    Anon says:

    KPMG and DT still pay for the exam and the review course. KPMG still gives a bonus for passing, don’t know about DT

  7. Anonymous
    Anonymous says:

    D&T gives $5000 if you pass in your first year $3000 if you pass in the second year. They pay for the review course and exam fees as well.

  8. Johnson
    Johnson says:

    @55, what’s the metro practice? At DT Northeast, the bulk of promoted seniors (those rated 3s) got maybe a 2% raise which for most of them would probably bare put them above $60K. A “measly” 5-7% isn’t bad at all. That’s the thing I could never figure out about KPMG. In the Northeast, reputation wise, they always seemed to be the laggard in nearly everything but they always seemed to pay the highest salaries at the lower levels.

  9. Anoni
    Anoni says:

    Does anyone know, how much does it cost to send a staff to a weeks national training? How much would it have invested already in a senior before it decides to lay off a person?


  10. CG
    CG says:

    Can anyone provide some info on salary ranges for 1st and 2nd year seniors at Big 4 firm in the San Francisco Bay Area?


  11. Big4audit1st yr associate
    Big4audit1st yr associate says:

    Big four Charlotte, NC starting salary of 47k with 2k bonus. Seemed really low to me. After reading these posts, I guess it is. I already accepted though and hope that my experience and opportunities within the big four will pay off in the future. Oh, I dont have a grad degree, but do have requirements to sit for CPA.

  12. Big4audit1st yr associate
    Big4audit1st yr associate says:

    Sorry, forgot to mention that this offer was received this summer with a start date of fall 2010

  13. pwcnewbie
    pwcnewbie says:

    I have a random question that this blogs readers might be able to answer. Not sure what post to comment under but here goes. Does anyone know anything about companies like WTAS? I’m considering jumping ship from the big 4 but I don’t want to move and have hours that are just as bad. Its hard to imagine hrs worse than what I have at PWC but hey, most of the people that work at WTAS used to be big4 employees. Old habits die hard. Would appreciate some feedback if anyone is familiar.

  14. Big4SeniorAnon
    Big4SeniorAnon says:

    First year senior here at Big 4 in NE region and I do not pity those first year seniors at KPMG I read about above making $65-67k. As a top rated first year senior I make a shy above $58k (new hires are making $55k plus bonuses mentioned above – I “enjoyed” a 4% raise my first year and under 2% my second year). Top rated second year seniors are currently at $65k, while third and fourth year seniors (since no one was promoted to manager) are currently around $72-78k. First year manager floor was bumped down from $95k to $82k. As you can see, the salary gaps are huuuuuge. The problem here is that the managers who enjoyed the SOX boom and double digit annual raises and are now making well over $100k with less than 10 years experience. There is no natural attrition in this group since public accounting for these people is the best gig going. As a result, we have a glut of managers who don’t want to leave. My forecast? Hopefully, the two year hiring lag will result in a reduction of new hire salaries next year – think $50k (and maybe $47k the following year). Current staff shouldn’t expect much of anything next year, even if being promoted to senior. The decrease in the manager salary will hopefully weed out the 5th and 6th years who feel it’s not worth it to stick around another year for an extra $5-7k, especially when they can now command $90k+ in some guaranteed 40 hr/wk private gig. That will buy the firm an extra couple years to figure out a way to trim some of the managers and senior managers. They are already pushing hard for managers to sell new business and my guess is that will become a more important (dare I say KEY) aspect of the manager’s performance rating. Those who do not perform will be cut. There has also been talk of making the standard time until manager promotion 6 years instead of 5. This scenario leaves current 3rd and 4th years (like myself) in limbo. As a result of the increased workload and lack or salary increases, a number of frustrated first year and second year seniors have already jumped ship this fiscal year to avoid being exploited further for minimal pay during busy season. That being said, my rationale for staying is that I’m hoping the comp pool and increases next year will be geared toward mid-level seniors. As the current managers age and leave (or are forced out) over the next 4 years and as we approach IFRS convergence slated for 2014 (also around 4 years), those at my level will be the beginning of the new “wave” of manager promotees. The firm can’t afford to hemorrhage too many poor souls at my level without destroying the whole farm team. Plus, it’s only FAIR that we be compensated somehow for being the last group to start that was promised riches and golden prospects (all of which was backed up by current employees at the time, so we believed it. Trust me, I understand the firms still try to sell that, but current employees aren’t corroborating it anymore) only to realize that 3 years later we are working 30% more, with greater responsibility, for the same money. Then again, since when is anything about this job FAIR?

  15. Anonymous
    Anonymous says:

    I’ve guestimated that new hire training costs a mid-size to large accounting firm, minimally, on average, $5k per person per week. Someone else can verify my rough calcuations, as a lot of audit fees are turning more into flat fees::

    Labor = $100 billable/hr x 8 hrs per day = $800 per day
    Food & lodging & incidentals = $200 per day
    Total = $1,000 per day x 5 days = $5,000 per week

    There’s other costs as well, including airline, ground transportation, and car rental, if needed. An additional cost to allocate is if a firm’s senior members, including senior associates, managers or senior managers, are involved in training and instruction. These expenses are mitigated somewhat by tax deductions the company can take, and trainees who live locally and don’t have transportation expenses reimbursed, and tax deductions the company can take.

  16. Anonymous
    Anonymous says:

    @fm – your basic premise is that the Big4 are in collusion. Let’s think about this. I’m going to go back many decades and into a completely different profession. I graduated college in the early 80s and was not an accountant. Offers from many firms in many industries ranged from $20K-$30K or so. The low offer was in a state that has no sales tax. Given that, the range of the offers was actually within $5K. These are firms that would have no reason to be in collusion — Dupont, GE, Kodak, Xerox, smaller firms you wouldn’t know, consultancies, service providers, manufacturers — and they were offers across many states mostly in the NE US. Could it not be said that a college grad with a certain degree simply has a specific marketplace value regardless of where they go? I wouldn’t expect an art major to get the same offers as an engineering major or either to get the same range as an accountant. But I suspect that even if you look across degrees, the range isn’t that wide.

    Couldn’t it be true that there is a market for new grads, and that supply/demand stabilizes offers within a relatively tight range? It seems this has to be true — cause if a firm is below the range, then they will likely not get any acceptances, and if they are too high they will realize it pretty quickly.

    In the end — a difference of $5K in a starting salary will have little to no impact on your lifestyle and career future. Until you are talking about $20-30K differences… you aren’t talking anything at all. To a young grad $5K may seem like a lot… I can only ask those young grads to have patience and faith… cause it won’t be long before it looks quite different.

    And let me reiterate regarding the overtime pay thing… be careful what you wish for. As soon as overtime pay is instituted salary structures will be adjusted. base pay will go down… overall pay will not change as much as you think… and for some it will likely decrease. It will become an ordeal to get promoted to management — as you will likely have to apply for the position. People are worth what they are worth… the job is what it is. If the market can provide people to work 60 hrs/week at $60K… then the new structure will settle down to 60 hrs/week for $60K. All the success of such a law suit will do is make a nightmare for the firms and the employees during the transition time.

    Look back at the travel expenses lawsuits regarding the idea that supplier discounts were being called a kickback. Nothing has changed except now that amount of $$ is allocated to clients and made more visible. Instead of charging the client $150 for a flight, they are charged $120 for the flight and $30 for the transaction fees. The firms used those theoretical kickbacks to pay for the processing and so now they simply report both to the client and charge both to the client. For all the excitement and accusations — nothing changed and nothing was ever wrong. The overtime idea will be the same.

    At least you admit that your theories and analyses are unscientific.

  17. Tenacious Truman
    Tenacious Truman says:

    Anonymous @ 67 —

    1. I’ve worked at three Big 4-type firms. They each know what the other has been offering new graduates. Do they find out by calling each other’s HR department? Doubtful. More likely the info comes from the schools, or from the new hires themselves (the ones that get multiple offers). But they know, trust me.

    2. “People are worth what they are worth …” Well, if the past 18 months of layoffs have taught me anything, it’s that the Big 4 are terrible at valuing the worth of their staffs. From my perspective, the firms have created a situation where the staff need to approach 100% utilization in order to stay “safe” — without compensation for overtime (which is now essentially mandatory and programmed) and without, by the way, decent raises or chances of promotion. Did you see the various posts about Deloitte now mandating 125% utilization for staff? That’s right, 125%. Not a typo. And all that OT is uncompensated. The reason for that (in my opinion) is because (a) there is no longer enough staff to do the sold audit work, and (b) it was necessary to make partner unit values what they needed to be (budget-wise) in order for leadership to keep its positions. Your words betray a fundamental assumption that people are fungible and lack individual characteristics, which is of course consistent with firm management style. In fact, some folks tend to be worth more than others, especially in the consulting roles, even at first and second year status. The problem is really that the firms do not know how to properly evaluate the worth of an individual, who are (as Fran writes) simply “rows on a spreadsheet” instead of individuals.

    3. The problem with your travel kickback theory is that (a) the firms couldn’t demonstrate that the clients benefited from the discounts and rebates, and (b) the firms had signed contracts that promised to pass on to (government) clients any such discounts and rebates, which they breached. The firms sure paid out a lot of money if “nothing was ever wrong”. As in $100 million or so, if my memory serves me. And failure to pay overtime in accordance with state and/or Federal laws is actually not the same situation at all — it’s a violation of law as opposed to a breach of contract. Other than those small points, I have no problem with your logic. (Sarcasm.)

    Enjoy the koolaid my anonymous friend.

    — Tenacious T.

  18. Anonymous
    Anonymous says:

    Let’s look at things from a billing rate perspective in terms of first years vs. first year seniors:

    First Year Senior: ~1800 billable hours x $400 rate/hr = $720,000
    First Year Staff: ~1650 billable hours x $340 rate/hr = $561,000

    Revenue Difference: $159,000
    Base Pay Difference: $900

    Makes sense (sarcasm)

  19. Anonymous
    Anonymous says:

    @TT — you missed the points (which have absolutely nothing to do with the B4).

    1) market determines salaries, not an individual’s value/skills. If salary was determined by value, admins would get paid a ton more.
    2) a salary difference of $5K is not significant… it has almost no impact on lifestyle (particularly after taxes)
    3) over time the uniqueness of individual skills will impact salary only because that combination of skills has a different value in the market
    4) if people are willing to work 125% for 60K, then they will get 60K – regardless of the vehicle used to pay out that 60K (salaried or hourly with overtime) — it will end up being 60K
    5) no statement was made at all about whether paying overtime or not paying it is proper or illegal or right or whatnot

    And let me add — given the current economic situation (which yo uought to accept as being the worst situation since the 1930s) — the market will encourage people to work longer for less. This situation has made employees value job security more than pay or hours.

    My friend, maybe it isn’t koolaid… maybe it is just maturity.

  20. Tenacious Truman
    Tenacious Truman says:

    Hi Anonymous @ 70,

    Well, I read your post and responded to what you said. Let me respond, once again to your post, point by point if you insist.

    1. The market determines salaries to a large extent but the market for accountants is dominated by an oligopoly called the Big 4, which acts (intentionally or not) to overcome market forces. After the initial hire, each firm controls compensation and uses means other than an accurate valuation of an individual’s worth to determine that person’s compensation.

    2. Yes, I agree. But few 20-something’s have our perspective and the difference between $45 and $50 thousand seems quite large at the time. I would also point out that, since raises and promotions are currently tightly controlled and difficult to count on, getting the maximum up front might be more important today than 5 years ago.

    3. Not sure what your point is. If one wants to stay in the firms, one accepts that compensation is NOT tied to real or even perceived market value. Instead, it is tied to other factors such as “right fit”.

    4. No. I didn’t miss this point and I disagree. You can only squeeze a lemon so much before you end up with a piece of skin. If one receives $60K now with unlawfully withheld overtime compensation, then paying that OT should not affect salary. If it does, then the firms are penalizing their staff twice — once by failing to pay OT and then again by lowering compensation when OT is paid. You and I both know that OT is free profit to the firms, and one day that chicken will come home to roost.

    5. Dude, you were the one who brought up the travel kickbacks and then tied them to the OT issue. You wrote: “The firms used those theoretical kickbacks to pay for the processing and so now they simply report both to the client and charge both to the client. For all the excitement and accusations — nothing changed and nothing was ever wrong. The overtime idea will be the same.” My point is that both are wrong and both created litigation and settlement exposure.

    Finally there is a difference between “working longer for less” and taking advantage of a lack of options to work people to the bone. It may not be illegal but it’s morally wrong.

    I would also question your use of the term “maturity” and would challenge you to look at it as “greed-based cold-hearted treatment of fellow humans as chattel.” But perhaps that’s just me, being oversensitive after a decade in the firms and seeing partners profit on the backs of the staff.

    — Tenacious T.

  21. CasperTheGhost
    CasperTheGhost says:

    @70 – The one premise I heard over and over again while in Big 4 was “you don’t work for the salary you earn today, but for the salary you will earn tomorrow”. In my experience, anyone in the Big 4 can leave at any point in their career and earn at least 10% more in industry. That holds true even in todays market; while hiring has slowed and jobs are harder to find, when you do find them they pay more – I speak from experience. When you factor in the better hours in industry, you are earning significantly more for your effort. Surely this is indicative of a labor market that is not operating efficiently, and the source of that inefficiency is the market power wielded by the Big 4 accounting firms.

    As an employee at the Big 4 you need to be conscious of this wage gap and ask yourself does the present value of my future cash flows of working at the firm exceed the present value of future cash flows were I to leave the firm. In the days of 10% annual increases (and the carrot of partnership eventually), the math was definitely weighted in favor of the firms – I will forgoe 10% more today (and 3% annual increases in industry) in return for my current salary, plus 10% annual increases. Obviously that model no longer holds true with 0%-2% raises in Big 4. And who knows how long until those days return – I think all of the firms will continue to use the current economic problems to justify 2% raises in 2010.

    The other factor in this calculation is the risk adjusted discount rate. The uncertainty in the Big 4 has increased significantly, more so than in industry (other than the most impacted businesses like i-banking, financial guaranty insurance, etc). Before, if you served your 12-13 years you were fairly certain that the partner money truck would be pulling up to your door. Now the 12-13 years is looking more like 14-15, and then you may only get a non-equity partner (aka director) option. With all of the litigation looming, combined with the fall off in revenues now that the SOX bonanza is over, the payoff may not be as lucrative as once thought. Factor in the risk that you might be booted out before the hoped for payday if your name is on the wrong row of the spreadsheet, and you are dealing with significant uncertainty in the amount and timing of future cash flows.

    I think too often when working at the Big 4 you are focused on the task at hand – review financials, test expenses, tick the 10K, run, run, run, run – that you forget to look at your bottom line. Which is just the way the partners like it. Lift up your head. Look around. Make sure you are there for the right reasons.

  22. Tenacious Truman
    Tenacious Truman says:

    Casper @ 73, Thank you for rephrasing what I was trying to say, only more cogently.

    I.e., This. What Casper said.

    — Tenacious T.

  23. Anonymous
    Anonymous says:

    @73 – I don’t disagree with the outline you provide for how you should evaluate your own job decisions in light of market and salary potential. Not being an auditor, i can only say that my salary would not be higher if I left my current position. But nothing in what you say is related to the OT pay issue or whether anyone is being cheated. Offers/salary are what they are — as you indicate, a person should answer all those questions and then accept the offer that maximizes their happiness (which may be based on salary, company culture, vacation, environment, upward mobility, hours, etc…).

    @TT –

    1) we simply disagree… We disagree about how to measure value and whether value can actually be valued. I totally get that the way you value people and the way B4 leadership values people are not the same. I suspect I might agree with your valuations more often than not. I disagree that the other valuation methods and arguments are based in evil and malicious collusion or wrongdoing. I long ago gave up on living in a world where others, and specifically people in power, will agree 100% of the time with the way I value things/people. i wish my values were the ones everyone agreed with — I just have to be realistic and let go of that as something that will happen… it isn’t worth the energy to get upset about it.

    2) I agree a 20-something thinks $5K is a lot… I would hope that they can put some thought into it and realize that it isn’t. If we don’t talk about it and tell them that $5K isn’t worth the angst, then they may waste a lot of energy in that angst.

    3) I think you do understand the point, we have had the argument on how people are valued before — no need to reiterate. We disagree. I happen to think that things like “right fit” for example, exist at every firm, and that the review process is by definition subjective at all firms (no matter how hard they try to make it 100% objective – it is not). I see nothing different at the B4 regarding the process. I hate the process as much as the next person and I believe that the promotion decisions are often more wrong than right — but it isn’t a result of the process or unique to the B4. It is a result of people in power using a different measure of performance — and while I disagree with many decisions, I think the measures are usually the right things. Some people just get blinded.

    4) first — the concept that withholding OT pay is illegal is hardly a given. In my world, any job requiring a college education is salaried… I honestly do not see the argument for OT pay. As for squeezing a lemon — I agree… if the firms overall compensation (with or without OT pay) gets to the point where no one will take the job — then the market will adjust. Right now there are piles of people out there who want the job and will likely do it for less than $60K. You neglect to recognize that value is a relative term and changes over time… value is only what one is willing to pay in a particular moment in time. It is in the eye of the beholder — what one person pays a lot for the next may not. So stop trying to profess that you or anyone knows the value of themselves or their co-workers… you don’t. All you know is what your firm is willing to pay you — and sometimes you learn what others will pay for you — and then you make a decision.

    5) I grant you the travel kickbacks was a poor analogy – the point I wanted to make was not made… can we let that go and I’ll just say my bad. My point was that I am not making a statement on the legality or fairness of OT pay or lack thereof. I have made a statement here that I personally don’t think it is warranted, and while I am part of the class that is involved in the suit — I will never participate in such a litigation. My comments though aren’t about what is legal or not — I will leave that to the courts to decide… and courts often surprise us all. My point is that it really doesn’t matter how the court rules — because in time the pay will adjust to the new rules… and will be what it would be regardless of whether it is a salary or hourly w/OT scenario. If the law suit serves the purpose of giving notice that people are no longer willing to do this job for that pay, then the result will be higher pay — but there are other ways to go about it. Society evolves in interesting ways… this suit may be a precursor or trigger to change — but where we disagree is in the idea that this change (should it happen) is necessary due to malicious and illegal behavior. Maybe a better analogy is when labor unions came along. At first they served a good purpose… and pay as well as conditions rose. They rose because labor made the point that they will not accept the conditions anymore. But unions have often gone too far and caused more problems than solved them. Maybe you get the concept.

  24. fm
    fm says:

    @Anon 75 (and @TT)

    I love the debate and I love the fact that it is probably between someone outside the US and someone I know to be in a US state that holds overtime and labor laws more strictly than many others.

    Whether one agrees with the concept of “professionals” who are college graduates and salaried as being “deserving” of overtime or whether that somehow compromises their professional status, the bottom line is that in many US states and Canada and many other countries, these laws are clear, unequivocal and on the books for a while. That the Big 4 flouted them in California, Wisconsin, Canada, and many other places in US where class action lawsuits are pending or have been settled is sort of unbelievable. But less so if one considers the economic and political clout of the firms.

    In California, PwC has effectively lost the war but is still fighting a smoldering skirmish via appeals and the slow grinding process of the courts. However, when these cases start to be settled in the US, it will mean a profound change in the model, one the firms are not prepared to make because they have stuck their heads in the sand for so long thinking they would never be called out in it. Economic hard times may force sympathy for small business but it bodes ill for big business that breaks the law and is perceived to be harming workers.


  25. Anonymous
    Anonymous says:

    @fm — I agree with your sentiment. Should the courts rule that this practice is against the law — economic times are not too sympathetic to big firms. I also agree that should the B4 lose the cases it will “profoundly change the model”… that is the point I really am trying to make. I personally believe that after the evolution to the new model (which will take some time) is completed, the staff will not experience that the overall compensation package is diffferent (granted it will differ — I just think if you compare it the way you would compare two job offers from two firms they would be equivalent) than it would have been in the old model (granting that there would be natural changes to that model sans any court ruling on OT). I just think market forces are stronger – and with time they will flatten the impact of a change in the model.

    Let me try to rephrase… consider the following two options:

    1) court case rules OT must be paid — base salaries are adjusted, vacation benefits, medical benefits, etc, etc are all adjusted some how over say a 5 year period. At the same time economic forces may impact the supply/demand situation which will also impact how the decisions are made regarding these adjustments. So, suppose suddenly there is more demand and less supply – salaries and benefot packages would improve, so the adjustments made to the model would be an overall improvement. Or, suppose demand continues to fall and supply stays high — then the adjustments will not look like an improvement

    2) stay with the old model — if the supply/demand changes mentioned above happen — the same positive/negative impacts would be observed.

    In the end — if you look at the overall compensation package and work environment… I would expect that a reasonable person would deem them comparable or equivalent. You can never test my theory — because only one of these scenarios will actually happen and we cannot change history. But that is my opinion.

  26. Anonymous
    Anonymous says:

    @ 75 – In response to point 4: One thing to keep in mind… A staff accountant at a big 4 firm is not a position that “requires” a college education. Granted, firms may only hire people who have a college education, but it is not required. You don’t need to have a CPA. While the firms may hire people who have college education and who are eligible for a CPA, that doesn’t mean it’s a requirement. Theoretically the firms could hire someone to be a permanent staff accountant who only has an associates degree (and some small firms may actually do this). Think of it like nurses. In alot of areas, nurses are hourly employees who can earn overtime. Many of them have gone to college. However, it is possible to be a nurse without going to college (LPN, etc). So as a result, they fall into the bucket of being hourly. So I think there is an argument that staff accountants may be in a position where they should be hourly employees.

    As a disclaimer, I was a staff accountant at one point and never thought I should be paid hourly. You think pressure is bad on audit engagements to control hours now… just imagine how bad it will be if those extra hours are actually costing partners money

  27. Anonymous
    Anonymous says:

    @78 — I get your point. What you are telling me then is that all these staff accountants are actually under-employed. They are over educated for the position. So to play devil’s advocate — does that mean they are being overpaid, because they are being paid for qualifications that are not required to perform the job? If that is the case, then I fear winning the OT law suit will mean they will get a serious reduction in pay. I understand that the staff accountants are used for copying and getting lunch and other things that do not require a college degree — so in that sense I would agree with you. But if this is the argument then it is clear that they are being overpaid… and one could then argue that the amount of overpayment is a way to compensate for the long hours.

    I agree with your points, but they do not bode well for hoping to win this law suit (upon cursory analysis). I also agree with your thought regarding pressure to control hours. But this pressure will not increase if the hoursly rate goes down. The idea that staff accountants will maintain their current hourly rate and get OT on top of it is very unlikely IMHO.

    And to give context – I am not an accountant, but I do work at a B4.

  28. college student
    college student says:

    Just throwing this out there, as far as the labor market goes- Kids graduating from college right now don’t think that their labor is worth anything. We see our friends who graduated last year, who are unemployed and surfing and Craigslist all day, and all we care about is getting a job. The Big 4 could cut first year salaries to 45k, and they could still recruit some pretty good talent. Where else is an accounting grad gonna go work, seriously? Even if no-name firms paid more, the Big 4 would still get all the top kids. Brand recognition, resume item, ego…all of the things college kids are into!

  29. Anonymous
    Anonymous says:

    @collegestudent — you are right… people value a job and job security now more than they value pay. Even those with a job are willing to work more hours for the same (or dare I say less)… if it means they have a job and have it for the foreseeable future. Right now the best thing for you to do is secure a job with anyone at any pay and ride out the recession. Try to get a better name firm because that will help you after the recession ends moreso than the pay you get between now and then. Are the firms abusing you — I’m sure people will say they are. Are the firms hurting too — sure. But why worry about what is fair and equitable… get out there and you can get a job.

    My group is hiring. That said — it is harder to hire new grads right now… due to the firm’s recruiting red tape/procedures… but the job market is opening up. We just brought on 3 new college grads, made offers to 2 for next year, and have requisitions open. My advise — learn computer skills… be an expert at Excel, know some SQL or at least Access… and look into the non-audit practices (internal audit, IT audit, forensics) understand how to work with data (large amounts of data).

  30. Anonymous
    Anonymous says:

    @ 79 – 78 here. I never said staff would make more on an hourly basis, my guess is they’d probably get the same (or the way things have been going potentially a little lower). It could hurt the firms a little from a recruiting perspective if they have to publish what their base is and then show exactly how muh overtime is expected to prove out what they project to pay incoming staff. Even proving that out I think it will make the job less attractive since $30 – 40K base will seem like peanuts, even though you get overtime.

  31. Anonymous
    Anonymous says:

    @82 — I think we agree. I was indicating proposing a hypothetical to you. The hypothetical is that if your statement is correct that a college degree is not needed, then one could argue they are overpaid and the hourly rate would be lower. So if they worked a 2080 hour year they would get the $40K you refer to and with overtime they would get $60K they are used to now. Hourly employees are generally not paid the base pay that salaried employees get. Part of the reason is because they do get OT and salaried employees to OT on their own dime. How can one expect to convert from salaried to hourly and have the base pay remain the same — i just cannot see how that expectation is realistic. When recruiting you discuss overall compensation not base pay only. When reviewing offers — candidates should look at the entire picture. If I was told I would have a base pay of $40K and with near 100% certainty enough OT to bring that to $60K and some chance of more… I might like that better than a known base pay of $60K with no OT. It is a risk — the OT model could get me $50K or could get me $80K depending one what happens. Further, how can you justify associates making as much as sr associates, and sr associates making as much as managers… granted that happens even now (as the salary ranges overlap)… but if it is on a regular basis due to OT — they what is the incentive to get promoted to manager. It is simply unrealistic to believe that base pay will stay the same and OT will be added on top of that — if that is the case then many managers will ask for a demotion.

    It goes back to market forces — if people will do the job for $60K then the pay will be $60K regardless of whether it is salaried or hourly.

  32. Anonymous
    Anonymous says:

    @82 – an additional note. OT will encourage managers to use the most efficient people. This can be a good thing… but the point is that person A might not be as good as person B. In the salaried model, management is encouraged to work with the slower people and train them to do better and work faster. In an OT model — the most efficient will get the OT and thus within the job title there will be larger gaps in pay. So efficient person A may get paid significantly more than inefficient person B. I can clearly see that that is a good thing. But the fact that person B will likely not get the proper mentoring and training isn’t a good thing. Person B might be a great employee with a little coaching — and in an hourly model that is not going to be as easy to justify.

  33. fm
    fm says:

    We are forgetting something important in the recent OT discussions. You’re all so focused on what you’re going to get paid you’re forgetting about the economics of the business model.

    Auditors travel a lot. One of the biggest challenges for any firm that has to pay overtime is to negotiate the right rates with the client when there is uncertainty whether the work can be performed by all local staff, traveling staff (who may have to be paid OT to travel) and salaried versus hourly staff. At Jefferson Wells, there was a built-in huge disincentive to use project (hourly ) staff versus the salaried staff and staff from other offices when you ran out locally if the engagement involved a lot of travel or uncertainty over number of hours required each week. That meant local offices built up staff to restrict OT and excessive hourly and nonreimbursed travel costs rather than using staff on the bench on another office when a client expanded an engagement temporarily or permanently. (Or else they went significantly over budget with low margins. ) The Big 4 firms already have this disincentive to some extent because of their geographic focus and how they reward partners, but it will be exacerbated with OT changing how staff is recruited, deployed (what if one state mandates OT and another doesn’t?) and as a previous commenter stated, paid and promoted.

  34. Anonymous
    Anonymous says:

    @fm – great comments… the model will change dramatically in so many ways other than just pay. I personally believe that it is likely staff overall pay will remain comparable. But i also think that it will be unevenly distributed to individuals based on locality, deployment issues, individual work efficiency, and much more. And I also believe that the promotion process will not be as straight forward when making the leap to manager. That leap will become much more difficult to make.

    It may be cheaper to maintain a larger staff at low base pay, even when many are on the bench… than to ship staff around and load balance nationwide if one has to pay OT.

    Your thoughts are very interesting — and still imply to me that winning the OT case will not be a good thing for staff (other than the staff that have left the firms already).

  35. Tenacious Truman
    Tenacious Truman says:


    I like your point, which is that the profit formula will need to change if OT gets paid or if staff are considered non-exempt under FLSA until they get CPAs. It used to be that labor costs were fixed and one focused on managing utilization and realization. Under the potential future state, labor costs could well become variable, which would certainly complicate the profit equation. Partners might actually have to job cost, and manage real costs instead of “standard” or fictitious engagement costs.

    Anonymous @ 86 seems to be struggling with the concept of managing variable labor costs, and suggests that a larger staff at lower compensation is one solution to reducing or eliminating the variability. He/she might be right. Who knows? But based on my experience with Big 4 partners, precious few of them will be able to deal with any more variability in their business model.

    — Tenacious T.

  36. Anonymous
    Anonymous says:

    @86 is not confused at all… he/she is suggesting that if travel becomes an issue and you have to use local staff as FM suggests, and if variability of state laws also results in a new variable to manage — one thing they might be forced to do is have a larger local staff that is paid less because they cannot load balance across states.

    Seems @TT only listens when FM speaks — when others say the same thing in different words or suggest more hypothetical ramifications… apparently they simply are confused.

  37. Tenacious Truman
    Tenacious Truman says:

    Anonymous @ 86,

    Nowhere in my post will you find the word “confused”. Period. Your post starts with a mischaracterization of my comments, and then descends into non sequitor from there.

    Attention to detail. I’m told it’s important.

    For instance, notice the part where I say, “He/she might be right.” That’s the part that indicates I was “listening to you speak” (alternatively: reading your words).

    No need to get all defensive. When I was discussing my impressions of Big 4 partners, I was generalizing. I wasn’t talking about YOU. I’m sure YOU are a strong manager with a good grasp of engagement economics.

    Land sakes alive. Did your units get cut again, or what?

    — Tenacious T.

  38. 007 CPA
    007 CPA says:

    Does anyone know if raises or bonus will be back at the Big4 this year? What about a mass exodus once industry starts recruiting again?

  39. Anonymous
    Anonymous says:

    @87 — variable cost is not an issue in the current model. Clearly staff and management make variable pay and are billed out at some % of standard rates. The difference between their pay and billing rates is variable per person, but generally falls within a range. That said — I know we have sr consultant staff members making anywhere from around $70K-$110K… so the range is relatively wide. I know we have managers making $90K-$170K… a pretty wide range again. So the profit per person is variable. So OT adds in a minor element — that for a given individual the profit margin may change depending on when they work and in what state they work. None of that is new or any harder to manage to than what they currently manage to. The way they do it is not by person by job by hour — they do blended rates and figure in the end there are certain metrics that work. Those metrics may change — but it is easier (and more cost effective) to manage to those blends and overall guidelines than spend the time to estimate at such a specific level when that level of specificity will never prove 100% accurate or even any more accurate than the way they do it now.

    If you have clients unwilling to incur travel costs, and the only local staff would be paid at 1.5 or 2 times base hourly rate — they will start out accepting some overtime. But when there is enough work to justify the overhead of carrying more people, and enough work to keep them busy at some reasonable %age that will cover their base pay plus a reasonable margin — then they will just hire more at a lower base pay and fewer people will actually get that OT pay. Maybe they would consider making it shift work too. All these doors are opened once you go to an hourly w/OT model.

    If there is a way to sum up all this into one point — it is that lots of doors open as to how they will adjust the business model… most that I see are not favorable to the staff. Talk to some hourly workers — see if they get the treatment you think staff accountants will get if OT is instituted. They get lower pay, shift work, less flexibility in when/how/where they work, less opportunities to move up, have to punch timeclocks, and OT is highly monitored. For what reason do you believe that making staff accountants hourly will put them in a better position than they are in now (whether or not OT is required by law).

  40. Anonymous
    Anonymous says:

    Question — for all the OT talk indicating that staff remains hourly until they get a CPA — what happens for the advisory and other staff that may never get a CPA and will never ned one?

  41. fm
    fm says:

    @ 92

    Most of the US state laws (out side the US is much different and much more supportive of workers) focus on two main criteria: Licensing (which implies professional) and/or involvement in supervisory or independent judgment activities. You’d have to read the laws in the state you’re in to know for sure what the criteria is. But, in general, if you are performwing a job where you have no control over your activities, exercise no independent judgement and do not manage or control others, you may be considered non-exempt, meaning eligible for overtime. Unfortunately, custom, lack of resources, and in the case of the audit firms, political clout has diluted both the desire of folks to complain and the appetite of the the agencies to enforce wage and hour laws in all cases.

    Advisory and other staff who are not CPAs typically fall into two categories in the firms – client service and non-client service. Client service staff are the ones who because of custom and clout hardly ever get overtime, (considered exempt) although in other kinds of companies, sales and other “professional” level staff have successfully claimed it under law. Non-client service staff fall into two categories just like in any other company – workers and management. Where that line is finally drawn is up to you, but there are non-client service full time employees in the audit firms who do get paid overtime. Not a lot, but they do, depending on the state and in some cases union representation, although that is very rare.

    Interestingly enough smaller and regional accounting firms typically do pay overtime to client service staff until they receive their CPA. (And all the firms, I believe, pay overtime to interns.) The smaller firms are more vulnerable to enforcement, do not feel they have the clout to take chance with state laws, and feel that gives them competitive edge over larger firm when it comes down to pay for work performed and a true work-life family balance atmosphere. In other words, there is an element of “voluntary” built in to working ungodly amounts of overtime because you are being compensated specifically for it and it can be clearly valued and costed.


  42. Anonymous
    Anonymous says:

    @fm — makes sense. I don’t think there is too much difficulty defining those employees with management responsibilities. But the terms “no control over your activities” and “exercise no independent judgement” are quite a challenge to define. I would not say that our staff (advisory) have no control and exercise no judgement. But I could be convinced that could be true in audit based on what I am told about that environment. I would continue to question, though, that if these things are true – then are these staff members currently overpaid?

    I also agree that the US has become a challenging work environment – usually favoring employers over employees. This is a pendulum swing though — the unions were once very necessary, then they went too far, now we are at another crossroads in labor laws and work environments… with most Americans working excessive hours. But part of that is simply cultural — we are raised to define ourselves by our career and to gain self importance by how much our employer needs us. We have to address all parts of the equation. You can also argue that for all the hours Americans put in they are paid more than those in other countries and have a higher standard of living. Of course that may be changing too.

  43. Anonymous
    Anonymous says:

    Thanks so much for the post! I’m trying to compare offers, does anyone have salary figures for NYC metro this year for the big 4?

  44. Anonymous
    Anonymous says:

    Being an undergrad student who is interested in the Big 4 as a starting position, this article really informed me well. Regarding starting salaries, is it really prudent to challenge the partner who has just given you an offer to renegotiate? @42, the “magic sentence” almost seems too risky to utter under the pressure of a senior exec meeting. I would probably air on the side of caution in that case. I agree with many of you that freshly graduated analysts have little to no leverage in such negotiations. Also, how significant is the COLA difference between DC and NYC (the two areas in which I’m considering to settle post-undergrad)?

  45. PwC
    PwC says:

    As an undergrad you really have no leverage. What is that you think you bring to the table more than any other undergrad? Starting out, everyone in the same area gets the same package.

  46. PwC
    PwC says:

    1st yr associate at PwC in NY area is $56k plus $3k bonus (with MBA in accounting)….pretty sad but expected given that my resume is now GOLD

  47. pwc assoc in nyc
    pwc assoc in nyc says:

    received my offer in feb 2008 from PwC/advisory in nyc as associate. i accepted the offer of 75K base with $3500 sign-on bonus for a total of $78500 for my first year. of course, given the economy i didn’t get a raise this past review cycle. oh well, can’t complain. 75K isn’t too bad – fyi i have 2 masters degrees.

  48. EYinSW
    EYinSW says:

    Offered $50K first year + Becker Review + CPA Exam fees + Benefits + $5K bonus if the exam is passed within a year. I was also given the option of starting in July or Sept/Oct…

    Was a little upset that there wasnt a signing bonus, but I’m with @97… I feel like my resume will soon be golden…

  49. Oseloka Albert Okagbue
    Oseloka Albert Okagbue says:

    I have a crazy idea all of a sudden. We all know that Auditing most corporations is done between September and May; why haven’t any firms considered structuring the working year that way? Think about it. Workers could keep benefits during the “off” months, and receive a lower salary or nothing at all.

    First of all, working year-round is hard for most new grads to deal with. Secondly, this will deal with the problem of under utilization during the summer – firms can create a similar system for employees in practices where client work is scheduled differently e.g. not-for-profit audits. Finally, firms are already doing this, by allowing people to go on unpaid leave with their benefits. I wish I could afford to do it, personally. I would get so much other stuff done in 1-3 months and might be even more energized when I come back to work. I think firms need to analyze one or more of their offices, and try this as an experiment. Any ideas?

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