Does Size Really Matter… if you Want a Higher Salary?

Conventional wisdom says that lawyers who want big salaries should strive to get to a large law firm as soon as possible.

But is that really the right approach, and is it even based on the correct information?

We’re going to run through a few factors to consider when it comes to legal salaries, and address the age old question: is bigger really better?

Many Ways to Skin a Cat

Lawyers with a few years under their belt probably remember their days as a junior, counting the hours they worked each week and realising that their effective hourly wage was less than their half-drunk friend who worked as a trolley collector twice a week.

While we appreciate that money is money, it’s also important to take a bigger picture view of the salary you’re going to attract, and factor in several other variables to see whether a bigger salary is everything that it seems.

At the end of the day, it’s the total package that makes a difference for long term satisfaction. And we don’t just mean bonuses here, we mean all the elements that go into whether you actually find your salary rewarding for what you do or not.

The Hourly Calculation

If you’re working 80 hours a week and somebody else is working 45 hours a week, but you only have a salary that’s 1.3 times larger than theirs is… who’s actually getting paid more?

This is a simple but effective question to ask when it comes to salary, and isn’t necessarily only a function of size.

While some large firms enjoy a degree of notoriety when it comes to extended work hours, you’re going to find regular long hours at every end of the spectrum from boutique to international.

Using this approach, before a salary can be measured against another you need to try and find out the realistic work hours. These usually bear little resemblance to the “office hours” you’ll have read on the firm’s website.

The Total Package Calculation

Most firms offer more than simply a salary – they offer other things too, the most valuable of which can be bonuses on top of base salary.

When looking at the total package, we highly encourage you not to be swayed by perks that don’t matter to you. There’s a big difference between having a free gym membership in the gym 3 levels down that you won’t use, and having a $25,000 bonus opportunity.

So take a look at the total package and consider what’s genuinely valuable to you, and what it’s really worth. Two weeks’ extra leave is significant, but birthdays off is not. A large bonus might be attractive, but what are the hurdles you have to jump through to get it?

Look at the whole package.

The Lifetime Career Calculation

The greatest potential for income as a lawyer is usually found after partnership. With that in mind, the faster you can get to partnership the more quickly you can accelerate your income growth.

Here the question becomes: how long, realistically, will it take before you get to enjoy the fruits of partnership?

If Firm A has a potentially higher payout but likely 10 years later than Firm B, it’s entirely likely that Firm B is going to be a more financially satisfying decision.

Especially since, over time, there’s a good chance you’re actually going to earn more at Firm B because of the head-start you got.

So – calculate the time it will take for you to be earning partnership rates, and find out what the real difference is likely to be over time. Of course, you’re making an educated guess to some extent but it’s entirely possible to do so.

So do Bigger Firms Pay More than Smaller Firms?

What about in absolute dollars – do larger firms actually pay more?

It depends.

For graduates, there’s no doubt that larger firms tend to offer better starting salaries than smaller firms.

However, consider this graph from our recent salary survey:

What you’ll see is that at around the 3-4 year post admission stage, the salary discrepancy between large and small firms shrinks considerably.

And when you take into account that the survey figures exclude bonuses, which a number of boutique firms offer, you might find that in some cases there are boutique firms with salaries which eclipse those in their larger counterparts.

Why is It So? And What’s the Future Hold?

Many firms suggest that brand new lawyers only really become profitable after around 2-3 years. Large firms provide significant amounts of training and onboarding to graduate lawyers to help them become functional lawyers in the workplace.

But by 3-4 years post admission, a smaller firm can hire someone to hit the ground running, and enjoy the profitability right from day 1. This means they can avoid the training costs taken up by the larger firm but enjoy the results of it anyway.

Beyond that, there are more and more boutique firms entering the market over the last few years who are highly profitable. These might be ex top-tier partners, or highly specialised practitioners. They have extremely high calibre clients and workload, and can command compelling salaries for their professional staff. In fact, some of these small firms have the highest salaries in the market.

Of course, not all small firms fall into this category, and some indeed have lower salaries than others. These often come with lifestyle benefits though, so it’s still important to ensure you’re crunching the numbers the right way before you decide.

Given the “NewLaw” approach to doing things seems to be on the rise, we suspect this trend will continue and it won’t be too long before we see more equivalent salaries between large and small firms across a wide range of post admission experience.

In a Nutshell

While history suggests that larger law firms pay more, that trend is certainly changing. There are many highly paid practitioners in smaller firms, which often have better opportunities for promotion and career advancement.

Even so, always look at the package from different angles as we’ve described above, to ensure that you’re comparing apples with apples.

Want to know if you’re getting paid what you’re worth in the Brisbane market? Give us a call and we’ll be happy to have a realistic chat about it with you.