27 Aug 2019 Montgomery Salary Guide
Well folks, it’s that time of year again and as many firms are gearing up to commence remuneration reviews, we are pleased to announce the release of the 2019 Montgomery Salary Guide. This year, we have extended our research to include Brisbane salary data along with Sydney and Melbourne.
Our experienced consultants have worked together with our valued candidates and clients to collect salary data from over 2,000 Associates, Senior Associates and Legal Counsel. The data includes current salary packages and recently secured salary offers from the full range of law firms; from boutique right through to top-tier. Based on a thorough review of our competitors’ published salary data, the data we have compiled would suggest that the 2019 Montgomery Salary Guide is the most accurate and up to date guide of its kind in Australia.
2018 was a bumper year for major law firms on the back of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. This, when combined with significant regulatory change, an increase in M&A activity and major infrastructure projects across Australia saw overall law firm profitability increase by an average of 8.2%, with top-tier firms leading the way with an average increase of 11% (some reporting an upward spike of 15%). While few firms are predicting a repeat performance in 2019, confidence remains high and the majority of firms across Australia are expecting revenue and workflow to remain steady.
Unsurprisingly, nearly every firm highlighted recruitment and retention of staff as their greatest challenge in 2018 and we expect that trend to continue well into 2019.
The Sydney offices of top-tier firms increased their salaries across all levels by close to 8% at the start of 2018, and we have seen the Melbourne offices follow suit recently with an increase of 9% in 2019.
Increased work-flow (coupled with fierce competition between Sydney firms for interstate and international talent) has seen the average gap between Sydney and Melbourne top-tier firms narrow significantly from 12% in 2018 to just under 6% in 2019.
With a number of US firms in the market inflating salaries, we saw an unprecedented number of sign-on bonuses across top-tier and UK firms in 2018/2019, ranging from $5,000 through to $20,000.
Brisbane salaries grew at a slower pace than both Sydney and Melbourne in 2018/2019. As a result, the average top-tier lawyer can expect a salary increase of just under 15% moving from Brisbane to Sydney.
As predicted, average wage growth at Sydney top-tier and international firms for 2019 has been close to 3%, which is unsurprising following the bumper 8% increase in 2018. The greatest increase in salary in 2019 has been at SA 1 level, from $150, 000 to $158, 000 and at SA 2 level, from $168, 500 to $176,000.
The Melbourne top-tier market has exploded on the back of increased work flow across key firm revenue streams including corporate, dispute resolution, banking, projects and real estate. With demand for solicitors at an all-time high, we have seen growth of just under 9% across all levels, with a spike of between 10% to 15% at PAE 2&3 and SA 2&3.
A major contributing factor is the raft of international firms, including Jones Day and White & Case, making their presence felt with a sharp increase in recruitment activity. On average, they are offering salaries of 20% to 30% more than their traditional top-tier competitors.
We are expecting Melbourne salaries to stabilise towards the back-end of 2019/2020, following a similar trend to the Sydney market in 2018/2019.
With the mid-tier and boutique market in Melbourne not experiencing the same growth, a move from a Melbourne mid-tier to a top-tier can see your salary increase by an average of 12.7% across all levels, with a move at the 2PAE, 3PAE, 4 PAE, SA 1 and SA 2 levels yielding an increase upward of 15%.
We predict that top-tier firms in Brisbane will increase their salary packaging across all levels to combat the battle for talent in an increasingly candidate short market.
As it stands, the Brisbane offices of top-tier law firms pay on average 9% higher across all levels than their mid-tier counterparts, and 15% above boutiques at all levels. Notably, in the first few years of practice (i.e. from 1 PAE to 3 PAE) there is only a 5% average difference between top and mid-tiers but a 17% average difference between top-tiers and boutique law firms at the same level of PAE.
Interestingly, in top-tier law firms, the Brisbane offices’ salary packages sit at approximately 15% less than their Sydney counterparts.
Due to increased competition, the Sydney mid-tier market has undergone some consolidation over the last 18 months with former heavyweight firms Kemp Strang being consumed by Thomson Geer; DibbsBarker taken over by Dentons; and TressCox merging with HWL Ebsworth.
Wages from 2018 to 2019 have, on average, increased by almost 3.5% and at a higher percentage at PAE 4, 5 and SA 1, where mid-tier firms compete heavily with top-tier and international firms for talent.
There is still a premium to be had moving from mid-tier to top-tier (with an average increase of 11.5%). Interestingly the gap between mid-tier and quality boutique firms has narrowed significantly, due to a combination of newly sprouted boutiques with highly profitable margins and the competition for talent driving salaries up across all firms.
Salaries in the Melbourne mid-tier space also grew throughout 2018/ 2019, with an average percentage increase of just over 5%. The greatest increase in salary has been at 3 PAE, 4 PAE, SA 1 and SA 2 where lawyers are in the most demand across all tiers.
Profitability amongst Melbourne mid-tier firms is soaring and we are expecting a higher than average increase in salaries from 3 year PAE upwards towards the back-end of 2019, in line with the trend in the top-tier space in both Sydney and Melbourne.
The upper mid-tier market in Brisbane is very comparable with the average top-tier salary at sub-SA levels. However, at SA level and above, the top-tier average streaks ahead. A large number of mid-tier law firms have excellent incentives on offer for top performers at the SA and SC levels (which is not taken into account in this Guide).
The boutique market in Sydney has expanded in the last 12 months, as partners seek to take control of their own destiny by either leaving underperforming mid-tier firms or seeking greater control and profitability than a top-tier or international firm can offer.
On average, there is a significant salary jump (between 10% to 30%) that can come with a move from boutique to top-tier, however, we have seen a salary increase of just under 5% in boutique firms this financial year; a higher percentage increase than both mid-tier and top-tier firms.
This is directly underpinned by the expansion of high-end, progressive firms in the boutique space in corporate M&A, dispute resolution, class actions and construction.
At these high performing boutiques, salaries are often on par with or in excess of top-tier salaries. Boutique firms’ salary banding is not as strict, and this combined with higher profit margins allows them to be creative when it comes to reward structures. They offer increased flexibility, access to the latest technology and genuine career progression; as such they are posing a serious threat to top-tier and international firms.
Boutique firms in Melbourne continue to grow in popularity as more firms launch in the corporate, litigation, property and construction space. On average, salaries at boutique firms grew just under 3% in 2018/19 and we are expecting a similar trend into 2020.
The boutique market in Melbourne doesn’t tend to compete on salary with top-tier and mid-tier firms and when a lawyer departs a boutique to a top-tier or mid-tier they (on average) increase their salary by 21% and 9% respectively.
There has been an increasing number of new boutique entrants to the Queensland legal landscape, particularly in the areas of construction, insurance, real estate and corporate M&A.
Given the range of different boutiques – some more akin to having a top-tier offering – there is a large difference in salaries within this category of law firm. That said, as mentioned in the Brisbane top-tier commentary, there is a marked difference between boutique and top-tier law firm salaries especially at the sub-SA level.
Of note (and similar to their mid-tier counterparts), there is a 12% average difference between the salaries at boutique law firms in Brisbane when compared with Sydney boutique law firms.
Please click here to get your copy of the 2019 Montgomery Salary Guide, or for a confidential career discussion please feel free to contact one of our experienced consultants on +61 2 8058 6000.