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Charge-out rates information released

28 July 2016 - By Geoff Adlam

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The average charge-out rate for lawyers who are law firm employees is $292.70 an hour (exclusive of GST and disbursements), according to a New Zealand Law Society survey carried out early June. This was up on the average charge-out rate of $270/hour in a February 2015 survey.

The question on charge-out rates ("what is your usual charge-out rate?") was included in the 2016 New Zealand Law Society Hays Legal Salary Survey which is now being analysed by the Law Society's survey partner Hays. The charge-out rates question drew a response from 21% of all lawyers employed (ie, not partners or directors) in law firms.

One of the most interesting findings is that charge-out rates appear to differ according to the gender of lawyers. The average charge-out rate for women was $285.54/hour, compared to $306.12 for men. An average higher charge-out rate for men (often around 7-10% higher) was maintained in almost all circumstances – whether size of law firm, location, or years post-qualifying experience (PQE).

While there are obviously many possible explanations for the differences, the proportion of female and male respondents who made up each of the categories was relatively consistent (for example, 14.5% of women and 14.4% of men who responded were in small firms, 15.7% of women and 15.4% of men had two years' PQE, and 43.6% of women and 44.2% of men worked in Auckland). A higher proportion of male respondents were from large firms, while a lower proportion were from medium-sized firms.

Fuller details are available on the Law Society website, but the following information shows charge-out rates by years PQE for all lawyers (ie, not by gender). The rates for lawyers with six years' PQE buck the trend of steady annual progression and the reason for this is unknown.

The data has been manipulated to remove extremes. An average and median (middle) rate from all the data provided is given for each year of PQE. A trimmed mean has also been calculated by removing the top and bottom 10% of rates from each PQE year. The range given has removed the top and bottom 10% of rates to ensure a more representative picture.

There are, of course, a number of caveats. Obviously these rates are indicative. As can be seen from the ranges given, charge-out rates vary widely. Experience, skill, time at a particular firm or practising in a particular field, location, firm size and type of work involved will all have an impact on a charge-out rate.

The assigned charge-out rate may also not be the rate at which a particular client is charged. The 2015 Waikato University Management Research Centre Interfirm Comparison found that the realised charge-out rate for senior solicitors was 79.9% of the average full charge-out rate. The rates given here are the full charge-out rates.

And, of course, a number of survey respondents pointed out that their firm now uses value billing rather than an assigned charge-out rate.

Average hourly charge-out rates by gender, all responses, June 2016

LocationFemaleMaleAllFemale as % of Male
Rest of North Island$254.20$251.04$253.0989.5%
Rest of South Island$230.93$258.03$240.4089.5%
Practice SizeFemaleMaleAllFemale as % of Male
  Small (<5 lawyers)  $236.32  $253.11  $242.13  93.4%
  Medium (5-20)  $266.55  $276.85  $269.80  96.3%
  Large (>20)  $326.91  $351.27  $336.15  93.1%

Employed lawyer hourly charge-out rates (GST and disbursements not included)

Years PQEAverageMedianTrimmed MeanRange
0 to 1$206.33$200.00$202.12$150 – $290
2$241.52$220.00$237.01$170 – $340
3$262.00$240.00$252.60$180 – $380
4$291.00$280.00$287.50$200 – $410
5$301.88$280.00$294.19$230 – $420
6$327.31$325.00$326.00$220 – $450
7$322.62$300.00$309.54$250 – $420
8$323.11$300.00$315.33$230 – $475
9$339.49$310.00$326.77$250 – $500
10$365.86$325.00$358.48$265 – $525
10+$362.39$350.00$353.04$265 – $490

Last updated on the 28th July 2016