Most Law Firm Staff can Expect a Modest Pay Rise Despite Record Low Wages Growth

Most staff working at Australian law firms can expect to receive a modest pay rise at or above the Consumer Price Index (CPI) despite wages growth flat-lining over the past year, according to Australasian Legal Practice Management Association (ALPMA) research.

285 Australian law firms from across the country, employing 9,623 people, participated in the 2017 ALPMA Australian Legal Industry Salary & HR Issues survey conducted by ALPMA and supported by IPA, In2View, Kaleidoscope Recruitment and KBE Human Capital.

“Forty six percent of respondent Australian law firms expect pay rises to be above the rate of CPI this year, with a further 27 percent planning on increases in line with CPI,” said Ms Emma Elliott, ALPMA Board member and Business Manager at Steinepreis Paganin, a Perth-based corporate and commercial law firm.

Twenty four percent of respondent firms are planning a limited or total wage freeze.

Wages growth reaches a record low of 1% for the legal industry

“Over the past 12 months, wages growth in the legal industry has flat-lined to a record low of 1 percent, down from the previous low of 2.8 percent last year and 4.8 percent in 2014,” Ms Elliott said.

“This is very much in line with what is happening in the broader Australian economy.”

“Negligible wages growth has also helped firms protect their profitability in what is quite a turbulent market,” she said.

Stagnating wages supplemented by significant bonuses—for select staff

“For select staff at most firms, stagnating wages are supplemented by significant bonus payments, typically based on their individual financial performance—how much business they bring into or generate for the firm,” she said.

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 32 percent of equity partners and 23 percent of partners receiving bonuses worth more than 10 percent of their base remuneration.

“This is a direct reflection of the changing remuneration mix, whereby salary increases are relatively small, but firms are prepared to pay well in the form of bonuses for performance”.

Bonuses for management and administrative staff are typically less generous or not offered at all.

“The survey results indicate few firms reward team efforts with bonus payments, and this represents a significant opportunity for firms to seeking to create cultures that support high performance teams and cross-business collaboration,” Ms Elliott said.

Positive signs for the legal employment market

The research reveals positive signs that the legal employment market is picking up, with half of the firms expecting to increase staff over the next 12 months, up 20 percent from last year. Of these, two thirds will be recruiting staff to grow their firm, while the remaining third will recruit staff to replace departures. 71 percent of firms expect to be hiring new lawyers this year.

There is also a high degree of churn in the legal employment market, with the average staff turnover rate at Australian law firms running at 23 percent.

Employee Retention the new #1 challenge

“Given all this, it is no surprise then that employee retention has moved into the top spot as the biggest HR challenge facing law firms this year—displacing ‘finding good people’ for the first time since the survey was introduced,” Ms Elliott said.

“Firms must continue to focus their efforts on retaining and engaging key staff within their business.”

“Top talent will always be in demand and highly sort after so I would encourage firms to regularly speak to their lawyers and to conduct exit interviews to uncover the key drivers for departure.”

No progress on women at the top

Despite being dominated by women (women make up 66% of all legal industry roles and 60% of all lawyers), women continue to be significantly under-represented in law firm partner ranks and board rooms, while dominating management and support roles.

“The percentage of female salaried partners rose a measly 1 percent to 35 percent of salaried partners in 2017, while the percentage of female equity partners remained static at 17 percent, as did female board representation at 21 percent,” she said.

“There is no doubt that this is a complex issue requiring effort and a dedicated, united focus to resolve—but this is not an issue that will be resolved in 12 months.”
“This is an ongoing conversation that firms need to have and commit to if we are going to address inequity in the legal profession,” she said.

The research revealed that only 40 percent of respondents agree there is a gender pay gap issue in the industry, with only 10 percent flagging this as an issue at their firm.

Big firms were significantly more likely to believe this was an industry-wide issue (73 percent) and one that affected their firm (40 percent). Accordingly, while only 14 percent of all firms plan to review gender pay differences this year, 73 percent of respondents from big firms plan to conduct a gender pay gap analysis.

Comprehensive, independent information on salaries, benefits and bonuses

The 2017 ALPMA Australian Legal Industry Salary & HR Issues report is the most comprehensive, independent report on salaries for all roles at Australian firms. This is the ninth year the research has been conducted.

285 respondent law firms, employing 9,623 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 by practice area, allowing companies to benchmark their remuneration strategy for each role with similar firms.

Other information provided in the report includes anticipated salary movements, recruitment plans, employment benefits, bonuses, staff employment arrangements, legal industry turnover 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 March and April, 2017.

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

About ALPMA

The Australasian Legal Practice Management Association, (ALPMA), is the peak body representing law firm and legal department leaders and managers. ALPMA provides an authoritative voice on issues relevant to legal practice management. Members of ALPMA provide professional management services to legal practices in areas of financial management, strategic management, technology, human resources, facilities and operational management, marketing and information services and technology.

For more information about ALPMA, visit www.alpma.com.au

2017 ALPMA Australian Legal Industry HR Issues & Salary Survey research report is available now.