The 2013 Canadian Lawyer Compensation Survey highlights the T · 2019-12-16 · 32 JULY 2013...

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32 JULY 2013 www. CANADIAN Lawyer mag.com T he growing gap between the “unrealistic” pay expec- tations of associates and the salaries law firms are prepared to offer them is highlighted in Canadian Lawyer’s 2013 Compensation Survey. Among the survey’s 553 respondents, the average salary for a first year associate has fallen to $66,000 — a nine-per-cent drop from last year, which had already seen a five per cent year-on-year decline. At the same time, a slightly greater number of firms are setting annual billable hour targets for associates: 49 per cent of respon- dents, up from last year’s 44 per cent. Targets range from 650 to 1,850 annual billable hours, with an average just over 1,400. The 2013 Canadian Lawyer Compensation Survey highlights the differences between what associates expect to get paid and what firms are willing to offer. By Charlotte Santry www. CANADIAN Lawyer mag.com JULY 2013 33

Transcript of The 2013 Canadian Lawyer Compensation Survey highlights the T · 2019-12-16 · 32 JULY 2013...

Page 1: The 2013 Canadian Lawyer Compensation Survey highlights the T · 2019-12-16 · 32 JULY 2013 Lawyermag.com CL_July_2013.indd 32 13-06-12 2:58 PM T he growing gap between the “unrealistic”

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The growing gap between the “unrealistic” pay expec-tations of associates and the salaries law firms are prepared to offer them is highlighted in Canadian Lawyer’s 2013 Compensation Survey. Among the survey’s 553 respondents, the average salary for a first year associate has fallen to $66,000 — a nine-per-cent drop from last year, which had already seen a five per cent year-on-year decline. At the same time, a slightly greater number of firms are setting annual billable hour targets for associates: 49 per cent of respon-

dents, up from last year’s 44 per cent. Targets range from 650 to 1,850 annual billable hours, with an average just over 1,400.

The 2013 Canadian Lawyer Compensation Survey highlights the differences between what associates expect to get paid and what firms are willing to offer.

By Charlotte Santry

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Page 2: The 2013 Canadian Lawyer Compensation Survey highlights the T · 2019-12-16 · 32 JULY 2013 Lawyermag.com CL_July_2013.indd 32 13-06-12 2:58 PM T he growing gap between the “unrealistic”

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The figures come amid much industry discussion about the need to rein in compensation packages for more junior lawyers. Asked about the areas of greatest dispute in establishing com-pensation rates, one respondent said: “Unrealistic new lawyers.” Another complained about “associates not billing enough,” while another put it as “paying associates higher and higher wages in return for them earning the law firm less and less.”

Does this year’s survey suggest firms, concerned about the economic slowdown, are imposing a starkly draconian regime on their associates? Not exactly. Only seven per cent of firms penal-

ize those who fail to hit their billable hours target, though this is a slight increase on last year’s five per cent. Meanwhile nearly a third offer bonuses to associates who hit the hours target.

Forty per cent of firms have annual monetary billing targets for associates, most commonly requiring them to bill under $200,000 a year. This is less ambitious than last year’s average target of between $200,000 and $300,000. In the 2013 survey, 39 per cent of firms say they hand out bonuses for hitting the billing target but only four per cent penalize associates who miss it. Half of all firms paid bonuses to associates in 2012, worth $10,000 on

ASSOCIATE COMPENSATION BY LAW FIRM SIZE

ASSOCIATE COMPENSATION NATIONAL (SAMPLE SIZE: 207)

Firm Size: 1-9 Lawyers (sample size: 156) 10-49 Lawyers (sample size: 40) 50-99 Lawyers (sample size: 9)

Year of Call Median Lowest Highest Median Lowest Highest Median Lowest Highest2012 $60,000 40,000 105,000 77,500 55,000 100,000 66,000 36,000 95,0002011 $68,000 50,000 120,000 78,100 40,000 120,000 73,800 45,000 106,0002010 $71,000 45,000 135,000 90,000 70,000 130,000 85,000 58,000 116,0002009 $86,500 57,000 175,000 100,000 80,000 150,000 95,000 63,000 126,0002008 $93,000 50,000 200,000 97,500 80,000 155,000 102,500 85,000 139,0002007 $105,000 70,000 165,000 122,500 60,000 200,000 107,500 85,000 146,0002006 $95,000 45,000 150,000 123,900 80,000 400,000 112,500 80,000 1580002005 $100,000 45,000 225,000 147,500 80,000 350,000 121,250 100,000 180,000

Year of call Median Lowest Highest 2012 $66,000 36,000 105,000 2011 $75,000 40,000 120,0002010 $82,750 45,000 135,000 2009 $97,500 57,000 175,000 2008 $96,293 50,000 200,000 2007 $118,146 60,000 200,000 2006 $112,500 45,000 400,000 2005 $118,500 45,000 350,000 and earlier

and earlier

RANGE OF ASSOCIATES’

ANNUAL MONETARY

BILLING TARGETS (SAMPLE SIZE: 80)

UNDER

$200

,000

$200

,000-$

300,0

00$3

00,00

1-$40

0,000

$400

,001-$

500,0

0 $5

00,00

0 +

40% 36%

15%5% 4%

The fneed to

k d a

ple size: 9)ple size: 9)

Highest95,000

106,000116,000

37% 12%1%

7%20%

1,301 TO 1,600

1,001 TO 1,300

ANNUAL BILLABLE

HOURS TARGETS

FOR ASSOCIATES

(SAMPLE SIZE: 77)

1,601 TO 1,800

OVER 1,800

UP TO 1,000

HIGHEST TARGETS 1,850 LOWEST TARGETS 650 AVERAGE TARGETS 1,403

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average but going up to $77,500.And newly called lawyers can still com-

mand high salaries: $105,000 was offered by one firm. However, firms with up to nine lawyers paid first year associates as little as $40,000, offering $60,000 on average. “Right now you could argue that in the current eco-nomic climate, some of the bigger firms are overpaying their associates,” says ZSA Legal Recruitment president Warren Bongard. While smaller firms, which like last year constitute the majority of survey respondents, may be reduc-ing first-year associate salaries, Bay Street firms competing for top talent are unlikely to follow suit, Bongard believes. “They’re still looking for their next partners every time they hire someone,” he says.

Even so, few seem to be matching the sala-ries offered by top firms in the U.K. and U.S., some of which pay newly qualified lawyers $185,000. Dal Bhatal, managing partner at legal recruitment firm The Counsel Network, says the downturn means Canadian firms no longer need to worry about foreign firms lur-ing young lawyers away. “When the economy was hot, U.S. and U.K. firms would cherry pick [Canadian] talent, even students who hadn’t even [been called yet], which created pres-sures.” International poaching is no longer a concern for Canadian law firms, however there is still sufficient competition within Big Law firms to keep salaries moving steadily upwards,

LAW FIRM PARTNER INCOME NATIONAL (SAMPLE SIZE: 231)

$51,0

00-$1

00,00

0

5% 14% 18% 16% 10% 10% 6% 6% 2%

$401

,000-$

450,0

00$4

51,00

0 -50

0,000

$501

,000 -

600,0

00$6

00,00

0 +

2% 1% 9%

UP TO

$50,0

00

$101

,000-$

150,0

00$1

51,00

0-$20

0,000

$201

,000-$

250,0

00$2

51,00

0-$30

0,000

$301

,000-$

350,0

00$3

51,00

0-$40

0,000

WHAT COMPENSATION METHOD DOES YOUR FIRM USE FOR EQUITY PARTNERS?(SAMPLE SIZE: 197)

LOCK-STEP

SIMPLE UNITMODIFIED HALE AND DORR

EQUAL PARTNERSHIP

24%

2%

3%8% 3%50/50 SUBJECTIVE-OBJECTIVE

31%EAT-WHAT-YOU-KILL

29%OTHER (PLEASE SPECIFY)

ME

L

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Page 3: The 2013 Canadian Lawyer Compensation Survey highlights the T · 2019-12-16 · 32 JULY 2013 Lawyermag.com CL_July_2013.indd 32 13-06-12 2:58 PM T he growing gap between the “unrealistic”

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average but going up to $77,500.And newly called lawyers can still com-

mand high salaries: $105,000 was offered by one firm. However, firms with up to nine lawyers paid first year associates as little as $40,000, offering $60,000 on average. “Right now you could argue that in the current eco-nomic climate, some of the bigger firms are overpaying their associates,” says ZSA Legal Recruitment president Warren Bongard. While smaller firms, which like last year constitute the majority of survey respondents, may be reduc-ing first-year associate salaries, Bay Street firms competing for top talent are unlikely to follow suit, Bongard believes. “They’re still looking for their next partners every time they hire someone,” he says.

Even so, few seem to be matching the sala-ries offered by top firms in the U.K. and U.S., some of which pay newly qualified lawyers $185,000. Dal Bhatal, managing partner at legal recruitment firm The Counsel Network, says the downturn means Canadian firms no longer need to worry about foreign firms lur-ing young lawyers away. “When the economy was hot, U.S. and U.K. firms would cherry pick [Canadian] talent, even students who hadn’t even [been called yet], which created pres-sures.” International poaching is no longer a concern for Canadian law firms, however there is still sufficient competition within Big Law firms to keep salaries moving steadily upwards,

LAW FIRM PARTNER INCOME NATIONAL (SAMPLE SIZE: 231)

$51,0

00-$1

00,00

0

5% 14% 18% 16% 10% 10% 6% 6% 2%

$401

,000-$

450,0

00$4

51,00

0 -50

0,000

$501

,000 -

600,0

00$6

00,00

0 +

2% 1% 9%

UP TO

$50,0

00

$101

,000-$

150,0

00$1

51,00

0-$20

0,000

$201

,000-$

250,0

00$2

51,00

0-$30

0,000

$301

,000-$

350,0

00$3

51,00

0-$40

0,000

WHAT COMPENSATION METHOD DOES YOUR FIRM USE FOR EQUITY PARTNERS?(SAMPLE SIZE: 197)

LOCK-STEP

SIMPLE UNITMODIFIED HALE AND DORR

EQUAL PARTNERSHIP

24%

2%

3%8% 3%50/50 SUBJECTIVE-OBJECTIVE

31%EAT-WHAT-YOU-KILL

29%OTHER (PLEASE SPECIFY)

ME

L

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says Bhatal. Firms are controlling costs by reducing their hire-back rates, rather than by cutting wages, she adds.

At the other end of the law firm ladder, the compensa-tion picture for partners is mixed. Just under half of part-ners saw their earnings increase in 2012 compared with 2011. The biggest proportion of respondents said partners at their firm earned between $151,000 and $200,000 including salary, annual draws, and splits but not bonuses or perks. But at 41 firms, partners earned over $600,000.

Around half of firms paid non-equity partners a sal-ary, while the rest paid a share of profits. Equity partners were most likely to be compensated on an eat-what-you-kill basis, though nearly a quarter were paid on an equal partnership basis and eight per cent on a 50/50 subjective/objective basis. Three quarters of respondents had no bill-able hour target for partners.

Two-thirds of firms offer benefits, comprising 12 per cent of compensation on average. Three-fifths offer perks such as professional development and health club mem-berships, making up five per cent of compensation on average. Only eight per cent of respondents, however, provide a pension plan.

Two-fifths of firms plan to hire more lawyers and 57 per cent will freeze numbers. Only two per cent say they will downsize.

In-house counsel

Corporate legal department budgets are consistent with last year’s, with a third of respondents plan-ning to spend less than $500,000, 23 per cent

between $500,000 and $1 million, 19 per cent between $1 million and $2 million and 14 per cent between $2 million and $5 million.

Salaries for newly called lawyers have risen overall [to $80,000] from $77,500. The median salary for general counsel at director level is $155,000, rising to $195,000 for those at executive level.

Bongard says companies’ desire to attract top lawyers who may be thinking of leaving their law firm is driving up in-house salaries but not necessarily to the point where they match the most generous law firm packages. Many corporate law departments are offering lawyers short- and long-term incentives such as equity and stock shares to

SENIOR IN-HOUSE COUNSEL COMPENSATION BY INDUSTRY

Sector Gov’t Financial Industrial/ Resource- Service Tech Non-profi t Professional Manufacturing based Services Average senior counsel at director level

Average senior counsel at executive level

$135,000 160,000 145,000 155,000 190,000 225,000 163,000 215,000

$145,000 200,000 170,000 253,000 220,330 375,000 130,000 200,000

IN-HOUSE COUNSEL COMPENSATION NATIONAL (SAMPLE SIZE: 71)

Year of call Median Lowest Highest 2012 $80,000 50,000 100,000 2011 $80,500 50,000 120,000 2010 $92,900 50,000 115,000 2009 $97,500 60,000 135,000 2008 $117,000 65,000 175,000 2007 $100,000 70,000 200,000 2006 $110,000 75,000 195,000 2005 $110,000 80,000 200,000 2004 $120,000 90,000 200,000

and earlier

SENIOR IN-HOUSE COUNSEL COMPENSATIONNATIONAL (SAMPLE SIZE: 71)

Median Lowest HighestGeneral counsel at director level $155,000 110,000 1,000,000General counsel at executive level $195,000 88,400 1,000,000

Highest

a

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create “golden handcuffs,” he adds. Increased supply could also push salaries back down, he believes. “There’s definitely the prospect that [corporate legal departments] won’t have to pay as much to get people [to move in-house].”

Bhatal agrees. “In-house is now the preferred environment. There’s a huge pool of candidates.” However, she highlights the marked regional variations, with Ontario traditionally offering the highest compensation levels and British Columbia the lowest, although Calgary’s average pay packages are starting to overtake Toronto’s, thanks to the oil and gas sector.

Overall, 72 per cent of in-house respondents said salaries were likely to rise in 2014, though this varied by sector. Less than half of respondents from government departments expected to see pay raises but nearly all those in the financial services industry and ser-vice sector predicted pay would increase. Some government bodies are circumventing mandated pay freezes by enhancing benefits packages, Bongard says.

The survey shows two-thirds of law departments paid bonuses to lawyers in 2012, ranging from $3,500 to $135,000.

All the corporate legal departments taking part in the survey said they offered benefits packages, which made up 16 per cent of compensation on average. Four-fifths offered perks like health club membership and three-quarters had a company pension plan.

57%KEEP THE SAME NUMBER OF LAWYERS?

40%HIRE MORE LAWYERS?

DOWNSIZE?

2%

IN THE COMING YEAR, WILL YOUR LAW FIRM . . .(SAMPLE SIZE: 291)

Of this year’s 553 respondents, 78 per cent identified themselves as regional law firms or companies; 13 per cent described themselves as national, while nine per

cent described themselves as global. A third were full service and the rest were split across a wide range of practice areas.

Seventy-one per cent represented law firms with the remainder being in-house.

Sixty-nine per cent of respondents employ one to nine lawyers, and 20 per cent employ 10 to 49. The remainder have upwards of 50 lawyers, with three per cent employing 500 law-yers or more. Sixty-five per cent operate out of a single office, 22 per cent have two to four offices, and the remainder have five or more offices.

Just over half (56 per cent) of respondents come from Ontario, 25 per cent British Columbia, 22 per cent Alberta, 16 per cent Quebec, eight per cent Manitoba, eight per cent Nova Scotia, seven per cent Saskatchewan, and eight per cent operate internationally. The rest are located in other provinces and ter-ritories. The total exceeds 100 per cent due to firms indicating more than one regional base.

The compensation figures in the tables and charts represent base salary before benefits and other perks, which were cov-ered in other questions. For respondents who provided salary ranges instead of solid numbers, the midpoints were included in the results. Obvious outliers have been discounted.

— DAVID GRUBER

GEOGRAPHY AND METHODOLOGY

AR, IRM . . ..............................................................................

WILL LAW FIRMSALARIES INCREASEIN 2014? (SAMPLE SIZE: 169)

YES

60%

NO

40%

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