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Will pay bumps be more conservative or remain above CPI this year?
Law firms, big and small, have much to consider in determining how generous the increases in salary for fee earners will be in the new financial year, writes Elvira Naiman.
Elvira Naiman
The “million-dollar question” we are being asked by clients and candidates alike is what we might predict in salary reviews come June this year, and given where the global and Australian economy is, it’s a complex and nuanced question.
Despite what might be a shaky economic prediction, law firms made strong profits in the 2022–23 financial year, and they will need to be seen to pass some of those profits down to their lawyers.
It may be that law firms need to deal with this by providing stronger-than-usual end-of-financial-year bonuses rather than setting an even higher bar for reviews in 2024 by increasing base salaries beyond the usual CPI-type increase.
In 2022, we were seeing some candidates get an extra 20 per cent, or even 25 per cent, in salary. Admittedly, some of these candidates were achieving this by moving rather than what they were getting in their review, especially in Q3.
Having said that — the star lawyers’ firms were wanting to hold onto were getting “extraordinary” reviews of salary and title to convince them that the grass wasn’t necessarily greener on the other side.
Surprisingly, some of the consulting firm data that law firms have access to suggests that salary increases last year were only in the order of 3 to 9 per cent, depending on one’s post-qualification experience (PQE) level. The reality is that the majority of lawyers are not employed in the top 20 law firms, and the lawyers in the smaller firms certainly did not enjoy the kind of salary increases that we were seeing in the larger mid-tier, top-tier, and international firms, thereby skewing the averages and median way down.
Given that many international firms based in Australia may be getting pressure from head offices in the UK or the US to take a conservative approach to reviews’ this year, the Australia-based larger firms may be in a position to offer their lawyers something less conservative. Time, as always, will tell.
Elvira Naiman is the owner and managing director of Naiman Clarke.
