Loyalty Tax: Accounting's Lose-Lose Incentive System | Big 4 Transparency

Employees lose stability and firms lose money through churnBig 4 TransparencyBy Dominic Piscopo, CPAFor CPA TrendlinesA growing body of compensation data suggests that accounting firms may be unintentionally penalizing their most loyal employees.In a recent solo episode of the Big 4 Transparency, founder Dominic Piscopo unpacks what he calls the “loyalty tax” — the pay gap between internally promoted employees and externally hired peers performing the same role. Drawing on 2024–2025 compensation data from thousands of U.S. and Canadian professionals, Piscopo outlines how this structural imbalance is reshaping career incentives across the profession.MORE Dominic Piscopo | MORE Private Equity | MORE Pay & CompensationThe loyalty tax, as defined in the episode, is the percentage difference in pay where externally hired employees earn more than internally promoted employees at the same level. According to the data, that gap is far from trivial. In the U.S., first-year senior associates hired externally earn roughly 6.3% more than internally promoted seniors, while first-year managers see an 8.9% premium. Even at the senior manager level, the gap persists. Canadian data shows a similar pattern, with especially pronounced spreads at the senior and senior manager levels.The disparity is even more striking in consulting and advisory roles.