The COVID-19 pandemic began more than two years ago, and organizations across a wide range of industries have been feeling the effects of a lack of qualified employees, a situation that started well before the onset of the pandemic. Facing frequent isolation through the need to quarantine, coupled with the lack of childcare due to school closures and a variety of other factors, many people are finding it easier to simply quit their jobs and seek new employment rather than return to an uncertain work environment with a lack of flexible work time.
This is especially true in professions that require some degree of a physical presence such as those in the financial services industry. However, while some analysts believe that the pandemic is the primary reason for the current labor shortage, others believe that the pandemic itself is not the cause of the labor shortage, but rather the catalyst that brought it about as a result of other factors that were not properly addressed in years prior.
Workforce shortages in critical occupations such as nursing and teaching were already at crisis levels prior to the outbreak of the pandemic, and they have reached an all-time high since then. Talent shortages are also becoming a serious issue in the accounting, corporate finance, and tax functions. The job market has grown steadily in recent years, particularly since the onset of the recession in the early 2000s, but many tax departments are still having difficulty filling open positions due to a shortage of qualified candidates. While this is never a good sign in tax, it has the potential to cause significant problems in tax departments for years to come and negatively impact the profitability of corporations across the country.
Factors Contributing to a Labor Shortage
As previously stated, there is no single factor or cause that accounts for the overall shortage of talent in the tax. Rather, as a result of the pandemic and its aftermath, we are witnessing what can be described as the perfect convergence of problems that were already present within the industry. It is necessary to acknowledge these in order to move forward.
In the accounting process, some analysts believe that relying on technology too heavily has been more of a hindrance than an asset, according to their observations. While automated tax programs can handle a significant portion of the workload, there are many aspects of process, particularly in State and Local Tax (SALT) that simply cannot be replaced by automation. For example, formally challenging property tax values at the Administrative Review Board (ARB) level requires a human mind to follow a particular course of action based on the specific requirements of a local taxing jurisdiction.
Experts Who Are Retiring
The Baby Boomer generation, also known as the “Boomers,” is reaching retirement age and leaving the workforce across all industries and functions. When they are not replaced by younger workers, they leave a significant gap between the pool of available candidates and the actual job market. In addition, the growing disparity between the number of available workers and the number of retiring workers creates a downward spiral because the work still needs to be done and is therefore passed on to those who remain employed, resulting in an overwhelming workload and increased levels of stress, which can also lead to an exodus of younger workers.
Generalization over Specialization
As is the case with many other industries, tax professionals are frequently so specialized that they are unable to engage in general business operations, which are the skills that many companies seek in their finance leaders. While many tax professionals begin their careers in a specialist capacity it can be career limiting and causing them to look for opportunities that expand their breadth of knowledge versus growing their existing specialization. Lisa Zachary, SVP of Consulting at Tax Advisors Group has seen this trend amplify over the years and cites it as one of the primary reasons that we’re seeing such high turnover in tax departments. Zachary states that there is “less value in being a subject matter expert” these days and mid-career tax professionals are more focused on becoming “well-rounded in multiple disciplines” and seeking new positions that provide such opportunity. Additionally, it has become a recent trend that college courses in tax do not adequately prepare their graduates for the general skills demanded by the workforce, instead emphasizing specialization in a specific area over the general skills that may be required to make them flexible in any industry finance department, according to the Financial Times. It may be that, as a result of this, the pool of available candidates does not contain professionals who possess the skills required for a particular open position.
The Ramifications of a Shortage of Labor
According to a recent Forbes article, an evaluation report was conducted on the accounting departments of large and small businesses throughout the United States and across a wide range of industries. Specifically, the rapid tax reform and shifting financial legal landscape that finance departments are currently confronted with have played a significant role in the lack of interest among younger workers in tax preparation and finance careers, according to the findings of this report. Some of the challenges were directly related to the COVID-19 pandemic and its ongoing impact on society, but this was not the sole and only reason for the difficulties that the finance industry was experiencing, nor was it the cause of the talent shortages that were experienced.
It was discovered in this report that, while technological advancements have allowed for greater flexibility for workers to work from home or remotely, and in using technology to improve communication within accounting departments, allowing for team collaboration, these advancements have not always translated into improved cohesion with the rest of the organization. Around half of the accounting departments who participated in the survey for this report stated that they felt they lacked sufficient resources, particularly people, to complete their jobs, ensure fiscal compliance, and preserve capital for their organizations, and that technology was only a bandage for the underlying problem of insufficient resources.
Increased reliance on additional technology and automation was seen in these departments as time went on. While this has helped to alleviate some of the strain caused by a shortage of workers in some areas, as previously stated, it does not eliminate the need for human discernment in certain high-risk situations. Staff can become more accurate and efficient when technology is properly implemented, and workflow automation in process management can be made easier with the help of technology. For those who chose to remain in the workforce, introducing new technology also meant undergoing extensive additional training on top of their existing jobs, which was made more difficult by the exodus of employees who were not replaced in the department.
The finance, accounting, and tax departments of companies are frequently the ones who advocate for better technology improvements, citing direct cost savings as the primary justification for relying more on technology rather than people. As a result, there will continue to be a requirement for tax professionals who are knowledgeable in both technology and tax, making it even more difficult to find talent that meets these requirements from an already limited pool of qualified candidates. According to previous discussions, general skills are already in short supply among those who graduate from college with a degree in finance, accounting, or tax. However, finding individuals who have advanced technology skills only adds to the burden placed on managers looking to build out qualified tax teams.
While the output of these multiple variables is a more challenging environment to acquire tax and finance professionals, the real impact is to the profitability and shareholder value of the organizations they support. Given that tax teams are spread thin they’re required to focus primarily on compliance, ensuring timely and accurate filings for all obligations, but aren’t able dedicate the time or specialization to minimize taxes paid for the various taxes owed. Since there are multiple taxing entities that an organization pays in to, the individual impact of paying too much in one jurisdiction often goes unnoticed, and the cumulative impact on profitability costs companies millions of dollars every year.
The tax season of 2022 is already underway, demonstrating how hardships and labor shortages are putting a strain on fiscal administrations and departments. The numerous extensions from the 2021 tax season, as well as the various exemptions and pandemic-inspired temporary regulations that are being implemented across various industries, are already causing finance professionals to become overburdened. Currently, financial professionals are working extra hours and overtime to put in the number of hours that would be required to properly address all of these adjustments, in addition to dealing with labor shortages within their respective departments.
Preparation for the Foreseeable Future
Maximize Available Resources (But Don’t Over-Leverage)
Assess your team’s individual workload and what they currently own and do well today as a baseline for determining what is going well and where gaps exist. From here identify what other tasks an individual could take on that don’t fall within their current job description that also provide them the opportunity to grow as future finance leaders. Even if a team’s tasks are perfected and operating at 100% efficiency this practice delivers on the demands of mid-career tax talent, and it allows for cross-training which can provide the coverage necessary to deliver in an uncertain talent ecosystem. It is important to note that such an initiative should be done with intention and be strategic, versus an emergency redistribution of workload that can feed burnout and compound turnover.
Partner with Specialists who Add Value to your Organization
Even if your organization has overcome the effects of the talent shortage and are fully staffed to support the business, enlisting the expertise and tenure of a specialist can deliver real value for your team and the organization. Tax consultants whose sole purpose is to specialize in a single tax, can deliver immediate value identifying potential overpayments that put money back in the hands of shareholders. Additionally, a consultant can be a great ally in supporting the workload of a team allowing individuals to focus on fewer defined tasks more acutely, improving their accuracy and engagement. Lastly, many tax consultants fee structures are mutually aligned to the profitability of their clients and they are paid only if they’re able to achieve savings, making the choice to engage in such a partnership an easy decision for organizations.
Focus on Compliance and Profitability
As has been the case for decades, tax departments typically find themselves operating in a capacity solely focused on compliance, but it shouldn’t be the extent of the value they deliver to an organization. Committing only to compliance has compounded the challenges described in this article because leaders outside of financial departments begin to believe that technology and limited resources can achieve compliance and ultimately diminish a tax department’s value. Such an effect can limit the necessary funds and resources to expand a team to the capacity necessary to meet all the needs of the organization. Many enterprising tax leaders have proven that compliance and profitability are not mutually exclusive and turning their tax departments into profit centers by measuring output in terms of savings. Leaders have made this shift by developing teams of strong tax professionals and partnering with the right specialist who can support their team in aggressively pursuing opportunities to preserve capital through tax strategy. Successful tax leaders are now able to report to leadership what they have filed and what they have saved the organization, ultimately elevating their value and position within the company.
Tax, like many other specialties, is experiencing a staffing shortage because of the changing nature of the workplace, which requires tax departments to assess not only how they get things done but add value to their organizations. While there are multiple considerations to combat this challenging environment, the most valuable asset that will carry tax departments in this new era is people, and identifying the right mix of internal team members and external specialist will be the primary contributor to a team’s success, measured by compliance and profitability.
About Tax Advisors Group (TAG)
Tax Advisors Group, an award-winning property tax consulting firm, is the leader in preserving capital through innovative property tax services for businesses nationwide. Headquartered in Dallas, Texas, TAG provides all services associated with property tax, including real estate and business personal property for businesses in every industry other than residential. Forbes recognizes TAG as one of America’s Best Tax Firms and TAG maintains a client retention rate of over 95%, both of which are testaments to TAG’s exceptional outcomes and elevated level of service. With a model rooted in the proprietary TAG ItTM methodology, TAG employs a unique and innovative approach to reduce the tax burdens of their hundreds of clients. Across the US, TAG represents over 14,000 accounts with a cumulative value of over $18 billion. For more information about TAG see www.taxadvisorsgroup.com or email email@example.com.