Labour Costs in CPA Firms

Not surprisingly labour costs are the biggest single costs in successful CPA firms. For the smallest firms it seems that practitioners do pretty much everything themselves. The smallest practices pay almost nothing in labour.

I haven’t included the bottom 50% of CPA firms in the charts below, since these (mostly) sole practitioners appear to be trying to do as much as possible to keep their incomes as high as possible. For the top 50% of firms in terms of revenue, it seems that very little is actually paid out in wages. Even the top 25% of firms pay an average of only $33,000 in wages.

Instead CPA firms seem to favour paying contractors. In fact many of the smaller CPA firms appear to be contracting out to other firms while operating their own small practices.

Obviously for unincorporated firms “profit” represents the practitioner’s income(s). For incorporated firms it appears that the practitioners may take a combination of subcontract fees and dividends – or simply leave profits in the firm to be taxed at the low small business tax rate.