25 Aug 2018 Montgomery Salary Guide
This year, for the first time in Montgomery Advisory’s history, we embarked on very interesting industry specific project. Our experienced consultants, with the assistance of our valued candidates and clients, worked together to produce the very first Montgomery Salary Guide.
The salary data was collected from over 1,500 Associates, Senior Associate and Special Counsel in Sydney and Melbourne. It included salaries 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 guides, the data we have had access to suggests the Montgomery Salary Guide is the most accurate and up to date guide of its kind.
Our findings:
The research returned some interesting but unsurprising results. We saw an increase in salary packages over the last 6 months and this can be attributed to the following factors:
• A shortage of top-tier standard candidates across all areas (particularly in banking, corporate, projects/construction, real estate, and restructuring & insolvency).
• An increase in new entrants to the market (e.g. global law firms, professional service firms).
• The continuing consolidation of law firms, through merger or acquisition.
• An increase in US law firms in the market putting pressure on salaries.
• Global competition for talent.
The most sought after lawyer levels continue to be at the 3-6 year PAE levels. We have, however, noticed an increased need for more experienced lawyers, particularly for entry-level SAs through to SA.3 year level.
Hiring in the legal market has reflected growth and positive sentiment in the economy in the first quarter of 2018, following on from a strong back end to 2017.
Top Tier
In Sydney, the maximum top-tier salary at most levels is about $30K above the median, which is a result of international firms being able to offer well above market to secure talent. The minimum salaries at most levels can be accounted for by the lawyers moving interstate from Adelaide, Brisbane (and to a lesser extent Melbourne and Perth). Lawyers that have recently changed practice area and were prepared to accept roles at the bottom of the banding also affect the data.
Although not included in the Montgomery Salary Guide, top-tier and international firms also offer increasingly competitive bonuses and incentive payments which somewhat level the playing field.
By July 2018, it is predicted that the average entry level salary package for an SA in Sydney will increase to $155K. Interestingly, the banding tends to broaden from SA.2 right through to Special Counsel level, as high performing lawyers start to get rewarded for exceptional work or their ability to generate and retain business. In order to keep their “super stars” firms start to go above and beyond the banding.
As it stands, top-tier Melbourne firms pay on average 9% higher across all levels than their mid-tier counterparts, and 13% above boutiques at all levels.
Interestingly, top-tier Melbourne firms salary packages sit at approximately 12% less than their Sydney counterparts across all levels. We note that Melbourne salaries are almost on par (around 4%-5% less) at the 4 year level, at the mid-senior associate level, and then again at the Special Counsel level. The increase at these levels is directly related to supply and demand and competition for quality lawyers.
We predict that top-tier firms in Melbourne will increase their salary packaging across all levels to combat the recent entry of a number of international firms and Sydney-centric firms in the market.
Mid Tier
In Sydney, the average salary difference at all levels between top-tier and mid-tier firms is 11.5%. The gap narrows to 6% at SA.1 where competition for talent is most fierce.
The maximum range of the upper mid-tier firms continues to remain very competitive with the average top-tier salary (until around the SA.3 level where they drop behind around $20K). Surprisingly, mid-tier firms are very competitive at the Special Counsel level, with the maximum range being very similar in both.
With a large number of mid-tier firms in merger talks or actively being targeted by larger national or international firms, salaries will remain stagnant at all levels until uncertainty decreases. In saying that we predict the upper mid-tier and national firms to remain very competitive with top-tier salaries as they compete for the same talent.
The Melbourne mid-tier space is more competitive across all levels than the Sydney market, which is evidenced by their mid-tier firms paying on average 10.5% less than their Sydney mid-tier counterparts, representing a 1.5 % increase when compared with the top-tier.
The upper mid-tier market in Melbourne is very comparable with the average top-tier salary at all levels, except at the Special Counsel mark (where the top-tier average streaks ahead). Many mid-tier firms have excellent incentives in play for top performers at the SA and Special Counsel level which is not taken into account in this survey.
Boutique
As expected Sydney boutique firms for the most part struggled to compete with their larger top-tier, international, national and upper mid-tier firms counterparts. Some of these more specialised boutique firms in corporate, high-end litigation and construction, however, offer very competitive packages and even better incentives and bonuses.
On average across all levels (sub-partner), Sydney boutiques pay around 17.5% below top-tier law firms and 6.5% below mid-tier firms. These numbers are somewhat skewed due to the high performing and high paying boutiques pushing the numbers up, which is evident in the maximum amounts quoted at each level in the table.
With the mid-tier space becoming increasingly competitive, we are expecting growth in specialist boutique firms in Sydney across corporate, banking, litigation, property, construction and employment which will in turn allow them to be more competitive on the salary front, moving towards parity equivalent mid-tier rates.
Top-tier equivalent boutiques in Melbourne specialising in corporate, construction and property remain very competitive with both the top-tier and mid-tier market averages. In fact, the maximum Melbourne boutique salary out strips the average mid-tier wage at every level.
Given the high quality of work and lean structure, the Melbourne boutiques can often afford to pay above market to retain top performers.
Our Predictions:
Based on market movement in the final quarter of 2017 and the first quarter of 2018, we are predicting a rise of between 3-4% in salaries at the top-tier and upper mid-tier firms.
We expect that mid-tier and boutique firm salary levels will remain in line with the CPI.
The 2018 M&A activity is predicted to be back to the recent 5 year high of 2015, with private equity in particular driving activity in the mid-market ($10-$200 million transaction size).
Hiring momentum in the legal market should continue throughout this year.
Significant transactional activity in the region has bolstered the demand for M&A and finance lawyers. Major infrastructure projects and their related disputes signals further opportunities for construction and projects lawyers, while high-profile corporate litigation, class actions and the banking royal commission have resulted in an increased demand for lawyers with a disputes skill set.
The 2018 Edition of the Montgomery Salary Guide makes for an interesting read. Please reach out to get your copy, or for a confidential career discussion please feel free to contact us on +61 2 8058 6000.
