Virtually no wage growth in Australian law firms

Fewer firms also expect to pay staff modest wage increases at or above the Consumer Price Index this year

Virtually no wage growth in Australian law firms
There was essentially no wage growth in law firm salaries in Australia in 2016, a recent study has revealed.

The Australasian Legal Practice Management Association’s (ALPMA) latest “Australian Legal Industry Salary & HR Issues Survey” found that wages growth across the legal industry dropped to a new record low of 1% over the last 12 months, beating the 2.8% low record in 2015 and proving to be considerably less than the 4.8% growth in 2014. The finding mirrors record low wages growth reported by the Australian Bureau of Statistics in its study of the broader Australian economy.

Furthermore, while most firms (73%) this year expect to increase wages at or above the Consumer Price Index, that figure is down 4% from last year. Nearly 20% of firms expect a limited wage freeze this year, while 5% expect a total freeze.

“46% of respondent Australian law firms expect pay rises to be above the rate of CPI this year, with a further 27% planning on increases in line with CPI,” said Emma Elliott, ALPMA board member.

The silver lining is that the insignificant wages growth has helped firms protect profitability in a volatile market, Elliott, who is also the business manager of Perth commercial law firm Steinepreis Paganin, said.

In addition, she noted that while wages have stagnated, select staff at most firms saw the trend offset by major bonuses based on financial performance. The study found that nearly 40% of firms pay lawyers and partners bonuses of more than 5% of base pay, with 32% of equity partners and 23% of partners receiving bonuses worth more than 10% of their base salaries.

“This is a direct reflection of the changing remuneration mix, whereby salary increases are relatively small, but firms are prepared to pay well in the form of bonuses for performance,” Elliott said.

The study also found that legal employment may be accelerating this year, with 51% of firms expecting to increase staff over the next year, significantly up from the 20% that said the same last year. Two thirds of the firms which plan to add staff will do so to expand, while the remaining will do so to replace departing staff. 

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