Industry in scramble for talent.

With an equal mix of amusement and consternation, Mannon Kaplan tells of how he gets calls from headhunters at least once a week.

Anyone who knows the forty-plus-year veteran and. managing partner at CPA firm Miller, Kaplan, Arase & Co. LLP, knows the recruiters are clearly barking up the wrong tree. But the tale also tells volumes about the job market for CPAs these days.

Workloads for public accounting firms of all sizes have increased exponentially, and, as recruiters and employers work overtime to fill the demand, everything is fair game, from pinching competitors' workers to throwing lucrative signing bonuses at candidates.

The need is most pronounced at mid-levels--accountants with three to five years of experience and middle management level supervisors--but the relentless pursuit to fill manpower needs has filtered all the way down the chain to include recent college graduates, and salary ranges at all levels have been increasing at a rapid rate.

"There's clearly significant competition for talented people, and I believe compensation levels have increased and probably increased fairly significantly over the last year or two," said Mark Bagaason, managing partner for the Southern California practice at Grant Thornton. "I don't know that I would call it a bidding war, but I think that what you have to pay to attract people has gone up and I think it's happening at the campus level as well."

Between 2004 and 2005, salaries for audit, tax and management executives at public accounting firms rose anywhere from 10 percent to more than 13 percent for large and medium-sized firms, according to data compiled by Robert Half International Inc., which provides staffing and consulting services to the accounting industry. Even small firms had to shell out anywhere from 5.7 percent to 11.4 percent more for staffers, depending on the experience level.

The average salary for a manager at a mid-sized firm, for example, rose to a high of $80,250 from $74,250 just a year earlier.

College grads can now earn more than $40,000 at their first accounting jobs, up about 10 percent from 2004, the Robert Half data shows.

'The whole package'

"We're having a hard time getting staff," said Tina Lazaroff, technical audit partner at Solomon, Ross, Grey & Co. "We're paying more for them than we've ever paid, and we're having to offer benefits we never offered in the past such as signing bonuses. We're offering significant pension benefits ... fully-paid health and dental and most people want to talk about flex time. So it's the whole package, not just salaries."

The problem stems partly from the passage of the Sarbanes-Oxley Act, or SOX as it's called, which added a number of steps to the auditing process and virtually doubled the workload at public companies. That has sent the Big Four accounting firms that service the bulk of publicly-owned companies scrambling for additional staff and, in many cases, coming up with creative ways to reward them.

"We've done a lot of different things this year," said Mark Nelson, partner at the Woodland Hills office of Ernst & Young, "whether we've increased compensation or increased recognition or given extra holidays or days off ... We've had a whole basket of things that we've tried to provide to enhance their compensation."

But it isn't just the need for workers at the Big Four that is creating a shortage and the corresponding salary pressure. The accounting and auditing workload at publicly-held companies is also increasing as a result of SOX. Many regional firms are picking up additional work that the Big Four cannot handle, and even privately-held companies are finding that the regulatory environment is requiring more complex transactions and more staffing.

"Every qualified accountant we see get an offer is entertaining multiple offers," said Donna Farrugia, regional vice president at Robert Half in Westlake Village. "So not only is the person looking for work receiving multiple offers, the accountants we're recruiting are also being recruited back by their existing firm. So there's this bidding war going on between a potential new employer and their former employer."

Much of the work related to Sarbanes-Oxley requires accountants and auditors with a fair amount of experience who can understand not just accounting principles, but how they are applied to a particular business. That is putting the greatest wage pressure on professionals with considerable experience.

Recent grads

But more recently, as the deadline for SOX implementation at smaller companies has been delayed until 2007, many public accounting firms are figuring they have some wiggle room to train recent college grads so that they are up to speed by the time the regulations take effect.

That's extended the competition for workers right down to the college level.

"What I'm finding is we're paying people more and more, and that's all the way starting at an accountant right out of school," said Howard Grobstein, a partner at Grobstein, Horwath & Co. LLP. "We, as a regional firm are either meeting or beating the Big Four in order to attract solid students out of colleges and universities. In order to stay competitive, that's part of the game right now."

These accounting firms say that their billing rates, although also dependent on the type and complexity of the work involved, are mostly determined by their 'people' costs, and as those costs rise, so too must billings.