Salaries Re-gain Some Lost Ground Amidst Signs of Growth in the Australian Legal Sector

Salaries at Australian law firms are gradually re-gaining ground lost after the global financial crisis, amidst some positive signs for growth in the Australian legal sector, according to annual research conducted by the Australasian Legal Practice Management Association (ALPMA), in partnership with Rusher Rogers HR Solutions.

This year, 254 Australian law firms from across Australia, employing 9,239 people completed the 2015 ALPMA/Rusher Rogers Legal Industry Salary & HR Issues Survey—an increase of 20% on last year. The survey was also conducted in New Zealand.

“Overall, the results show a modest 4.6% growth in salaries paid at law firms year-on-year and forecast salary increases for most staff at or above CPI over the next 12 months, despite the virtual flat-lining of wages growth in the broader Australian market,” Ms Susan Comerford, ALPMA Director and People and Practice Development Manager at Cowell Clarke, said. “There are also positive signs of recruitment activity to support law firms’ growth plans.”

The 2015 ALPMA/Rusher Rogers Australian Legal Industry Salary Survey Report provides a detailed review of the results of the survey and includes salaries paid for 74 roles within Australian law firms, including fee earners, executive, management and administrative staff categories, with differing levels of seniority and experience for each category.

Most firms plan salary increases at or above CPI rates

Of the 254 respondent law firms, 76% expect to pay salary increases at or above the Consumer Price Index (CPI) over the next 12 months—up slightly from 74% last year.

38% of firms expect to pay CPI-only increases, while 37% of firms anticipate individually negotiated salary increases above the CPI for their staff. The latter is a slight increase from 33% in last year’s results, but remains 10% lower than the 2013 results, where 48% of firms planned increases above CPI.

18% of law firms are planning partial wage freezes with some individual pay increases below CPI (down from 22% last year). 6% of firms (all with less than 25 staff) expect to implement a total wage freeze.

Modest salary growth over the last twelve months

“Typical salaries for all positions at law firms have grown 4.6% overall year-on-year, with some notable peaks and troughs,” Ms Comerford said.

“Lawyers’ pay increased slightly below the industry average at 4.3%, while paralegals and HR Managers have typically enjoyed an 8% pay increase. Pay rates for senior executive roles at law firms have not really moved, with a marginal decrease of only 0.6%.”

Show me the money!

“Senior Associates, special counsel and partners are paid best at large firms with 150+ employees, while more junior lawyers are better paid at mid-tier firms,” Research partner, Ms Susie Rogers, Principal at Rusher Rogers HR Solutions said.

Overall, lawyers working in Western Australia continue to attract the highest wages in Australia, although most administrative and management roles at WA law firms do not enjoy the same overall salary premium, she said.

Law firm CEO’s and General Managers are best paid in Victoria, while Practice Managers are best paid in South Australia.

For the first time this year, the survey analysed the pay gap for staff at firms in capital cities versus regional locations—with the pay gap for regional staff by role ranging from 14% for paralegals to a very significant 54% for knowledge management staff.

“Typically, lawyers working in capital cities enjoy 28% higher salaries than their colleagues in regional Australia—while senior executives, knowledge managers and marketing and business development staff are paid more than 45% more than their regional colleagues,” Research partner and Principal at Rusher Rogers HR Solutions, Ms Susie Rogers said.

Hiring for Growth

Demand for staff at law firms remains relatively steady year-on-year, with most firms (77 %) expecting to recruit lawyers next financial year, 60% recruiting secretarial staff, 43% likely to recruit paralegals and 29% planning on recruiting administrative staff.

The majority of firms (61%) plan to hire new staff to replace existing staff—while 39% indicated that were recruiting to grow their firm.

Of those hiring for growth, 56% are planning on growing by recruiting lawyers and paralegals, 15 % by hiring new legal secretarial staff, while only 7% are planning on boosting their business development and marketing staff.

“As we saw in our recent financial performance benchmarking study, firms are starting to shift their focus from cost savings to revenue growth,” Ms Comerford said. “Firms are focusing on strategic lateral recruitment of lawyers who come with clients and the certainty of bringing work with them.”

Finding good people remains the #1 challenge – but firms are failing to adopt best practice recruitment strategies

For the fourth year in a row, firms reported that ‘finding good people’ was their number one HR challenge.

Despite this, few firms (14%) have implemented a proactive talent sourcing strategy, which involves identifying and engaging with potential candidates before there is an actual vacancy, preferring to advertise when the need arises.

“Firms compete with one another to attract and keep the best talent and, while implementing proactive sourcing strategies may seem like a lot of work for little initial gain, firms need to take a longer term view of their recruitment strategies.” Susie Rogers, Principal at Rusher Rogers HR Solutions said.

“Only by doing this can you position your practice as an employer of choice for the candidates that you know you want when you need them.”

While most large firms (91%) offer a recruitment referral bonus for their employees, only 10 % of small firms have adopted this practice.

Increasingly flexible—but not so diverse or inclusive?

For the first time this year, the survey sought to understand the adoption of diversity and inclusion programs at Australian law firms.

70% of all respondent firms do not have a formal diversity and inclusion program. Adoption varies significantly by size of firm—with nearly all (91%) large firms with over 150+ employees having a diversity and inclusion program, compared to only 24% of small firms with less than 24 employees.

While there are only a small number of firms to date with a formal diversity and inclusion program, it is pleasing to see that firms are embracing the most sought after request, for flexibility in employment practices,” Ms Comerford said.

Overall, 74% of Australian law firms now offer flexible working hours.

Almost all firms with more than 25 staff (94%) now offer flexible working hours, and this has increased from 81% in 2013. Small firms are also getting on board, with 68% of small firms now offering flexible working hours, compared to 53% in 2013.

Productivity & Performance Measures

For the first time this year, the survey analysed a variety of staffing ratios, commonly used as indicators of productivity and performance at law firms.

The ratio of fee earners (lawyers and paralegals) to non-fee earners (all other positions) is used as an indicator of law firm productivity. The results show that for every 11 fee earners, there are 8 non-fee earners at Australian law firms. Typically, the higher this ratio, the more productive a firm may be.

Overall, there are three fee-earners to every one legal support staff at Australian law firms.

“Thanks to technology, lawyers have become more self-sufficient,” Ms Comerford said.

“This, combined with the outsourcing of services like sending dictation overseas for overnight transcription, means that we expect this ratio to continue to decline.”

Another key metric is the ratio of fee earners to partners, used to indicate the efficiency of a practice group, in particular how effective a partner is in delegating work to more junior members of their team.

Overall, there are four fee-earners per partner at Australian law firms. Partner in this context includes both salaried and equity partners and also includes Managing Partners who may also maintain a practice.

“Ideally law firms want partners out there representing the firm, developing the business and client relationships, and using more junior staff to support them on matters and file work,” Ms Comerford said.

The most comprehensive, independent report on salaries for all roles at law firms

The ALPMA/Rusher Rogers Australian Legal Industry Salary & HR Issues Survey Report shows the highest and lowest salary paid and the ‘typical’ salary paid for 74 roles at Australian law firms. Salaries for each role are also broken down by size of firm and by State, 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 and staff employment arrangements. This year, the survey was extended to include questions about diversity and inclusion programs and recruitment strategies. The survey data was also further analysed to generate staffing ratios and analyse pay differences in capital cities versus regional centres.

The ALPMA/Rusher Rogers Australian Legal Industry Salary & HR Issues Survey Report is provided free of charge to all participating firms. Participation was open to all Australian law firms. Non-participating firms can purchase a copy online for $550 (ALPMA members) or $2,200 (non-members). Data was collected in March, 2015.

About ALPMA

The Australasian Legal Practice Management Association, (ALPMA), is the peak body representing managers and lawyers with a legal practice management role. ALPMA provides an authoritative voice on the business of law. 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

About Rusher Rogers HR Solutions

Rusher Rogers Recruiting is your HR partner. They will source, recruit and manage all of your people issues, facilitating the following: HR Outsourcing, On-boarding and Outplacement services, Recruitment, OH&S, EEO & IR, Staff training and Research. Speak to them first, if they can't help you, they can advise you on the best course of action for your firm. For more information visit www.rrhr.com.au

2015 ALPMA/Rusher Rogers Australian HR Issues & Salary Survey research report is available now.