Australian Legal Industry Wages Flat-Line with Modest Increases Expected in 2018

New research by Australasian Legal Practice Management Association (ALPMA) shows wages are continuing to flat-line across the legal sector, and the forecast is for modest wage increases for staff working at Australian law firms.

288 Australian law firms from across the country, employing 10,644 people, participated in the 2018 Australian Legal Industry Salary & HR Issues Survey conducted by ALPMA and supported by In2View Recruitment, KBE Human Capital, Carlyle Kingston Global and u&u Recruitment Partners.

Consistent with low wages growth in the wider Australian economy, the average increase in salaries across the legal industry was 0.7 percent reaching a four-year low.

“Most Australian law firms are predicting modest wage increases at CPI, with 28 percent expected to negotiate with employees above CPI and a further 17 percent expect to increase salaries for all employees between 3–5 percent. While only 3 percent of firms will freeze wages for all staff, 14 percent expect to implement a limited freeze for some positions only,” said Dion Cusack, ALPMA President and Corporate Services Manager, K&L Gates.

Bonuses and incentives used to supplement salaries

The ALPMA research shows that nearly 40 percent of firms pay their lawyers and partners bonuses of more than 5 percent of their base remuneration, with 15 percent of salaried partners receiving bonuses worth more than 10 percent.

“To attract and retain staff in a market of stagnating wages, bonuses and other benefits are an important component of the remuneration package offered to key employees at Australian law firms,” said Mr Cusack.

“Bonuses for fee earners are calculated on their individual financial performance, usually based on fees they generate for the firm, while bonuses for other staff mainly relate to discretionary individual performance measures,” he said.

“Given all this, it is no surprise that developing strategies to retain talented employees remains the top HR challenge for Australian law firms,” said Emma Elliott, ALPMA Salary Survey Project Chair and Business Manager, Steinepreis Paganin.

“With average turnover rates at 19 percent, it makes good business sense for firms to continue to focus their efforts on retaining and engaging key staff within their business,” she said.

More firms are also offering staff recruitment referral incentives this year to encourage staff to recommend their firm to potential employees.

Employment growth expected

The research reveals positive signs that the legal employment market is growing, with 42 percent of firms indicating that staff levels at their firm grew over the previous 12 months, and 53 percent expecting to grow employment at their firm over the next 12 months.

“These figures reflect national forecasts of growth in legal and professional services jobs over the next five years in Australia, with Victoria leading the way with 62 percent of firms planning to increase staffing levels,” said Mr Cusack.

“Positively, recruitment intentions reflect expectations of firm growth (64 percent), while 39 percent is expected to replace departures,” he said.

Lawyers will be in high demand, with 76 percent of firms likely to recruit lawyers in various positions in the coming 12 months. Nearly half of firms surveyed are also expecting to hire paralegals/law clerks and 42 percent are expecting to hire support staff.

Continued gender imbalance at partner level

Gender inequality remains an issue at Australian law firms. Despite the industry being dominated by females (67 percent of all positions are held by women including 58 percent of lawyers), women continue to be significantly under-represented in law firm partner ranks and board rooms.

The percentage of female salaried partners remained static at just over a third (37 percent) as did the percentage of equity partners (17 percent). All other roles including support roles are dominated by women. Female representation among senior management is also lower in large firms.

“The stagnant nature of these results is disappointing,” said Ms Elliott. “Given the number of women in the industry and the need to retain them, firms need to embrace more family-friendly benefits and use these to gain strategic advantage in the employment market.”

“While flexible work arrangements are on the rise, the research shows that only 32 percent of firms offer parental leave entitlements over and above the government scheme, which is a real missed opportunity.”

“Staggeringly our research revealed that 44 percent of respondents believe there is a gender pay gap issue in the industry, with only 7 percent flagging this as an issue at their firm. There is a significant point of difference for firms who are addressing these figures and will likely benefit from a reduction in the average turnover figures,” she said.

Larger firms were significantly more likely to believe this was an industry-wide issue (71 percent).

Comprehensive, independent information on salaries, benefits and bonuses

The 2018 ALPMA Australian Legal Industry Salary & HR Issues Survey report is the most comprehensive, independent report on salaries for all roles at Australian firms. This is the tenth year the research has been conducted.

288 respondent law firms, employing 10,644 staff, from across Australia provided comprehensive information about salaries, benefits and bonuses paid for lawyers, management and administrative staff, and insight into the critical HR issues and challenges facing firms.

The report shows salaries paid for 70+ roles at law firms. Salaries for each role are analysed by size of firm and by State, with legal salaries further broken down this year by practice area, allowing companies to benchmark their remuneration strategy for each role with similar firms. This data is invaluable as part of budget preparation and upcoming remuneration review cycles.

Other information provided in the report includes anticipated salary movements, recruitment plans, employment benefits, bonuses, staff employment arrangements, legal industry turnover and information on parental leave and diversity and inclusion programs.

The ALPMA Australian Legal Industry Salary & HR Issues Survey report is provided free of charge to all participating firms. Non-participating firms can purchase a copy online for $A550 (ALPMA members) or $A2,200 (non-members). Data was collected online in February 2018.

The research was conducted for ALPMA by Survey Matters, an independent research consultancy, to the highest standards.

2018 ALPMA Australian HR Issues & Salary Survey research report is available now.