By Craig Stephen
Salary levels for junior lawyers continues to be hot topic for the profession and legal community with claims some lawyers are being paid below the minimum wage.
There are also suggestions that low remuneration for lawyers in the first few years of their careers is forcing some to leave law because they can’t make ends meet and the prospect of partnership seems unattainable.
Legal salary surveys are carried out in New Zealand by several organisations. The Australasian Legal Practice Management Association (ALPMA) and McLeod Duminy’s latest survey closed on 14 February and results were released last month. Results are provided free of charge to participants, but non-participants must purchase the information. This means that all but high-level details are not publicly available. The survey provides average salaries for over 55 legal, management and administrative roles in law firms, broken down by location and firm size.
The New Zealand Law Society | Te Kāhui Ture o Aotearoa and Niche Consulting Group’s legal salary survey of 2018 (available on the Law Society website) showed that nationally the mean salary for those in their first year in the profession and working in small-sized private practice was $50,000, with the mean salary in the South Island lower, at $47,000.
For medium-sized firms (5-20 lawyers) the mean was slightly lower nationally at $49,000; but rose to $54,000 for large firms.
The salaries for those with two years’ experience rose from $58,000 to $64,000 in the same three groups; and for three years it rose from between $62,000 and $79,000 across New Zealand.
But even for those with four years’ experience working in small and medium-sized firms, there are staff who in 2018 were earning $40,000 or less.
The figures for in-house show better rates – between a mean of $61,000 and $70,000 across corporate/commercial, central government and local government, but a modest $46,000 for first-year lawyers in not-for profit/other.
The survey found that lawyers in their first decade in the profession tend to work full-time, with the proportion working part-time rising steeply after 10 years’ PQE.
Living and minimum wage rates
The Living Wage for 2019 was $21.15 per hour, equating to $43,992 per year on a full-time week. The minimum wage rode to $18.90 on 1 April, which is $39,312 per year.
Furthermore, a survey conducted by the Aotearoa Legal Workers’ Union (ALWU) and released last November shows that 50% of respondents (young and new legal professionals) who were working at large law firms reported working for an effective hourly wage of less than the minimum wage when their fortnightly salary was divided by the number of hours that they had worked.
That figure improved to 42% when medium-sized and small firms were taken into account.
Other findings of the survey included that almost all respondents reported consistently working overtime, and bonuses for junior legal workers are “opaque, rare and of low value”, especially when compared with the hours legal workers are required to work to get them.
A more recent survey, conducted by NZ LAW Ltd and released in 2019, found similar results in terms of annual salaries. In that survey, the lowest full-time equivalent salary rate for a junior solicitor was $39,000, with the median salary being $49,272. The actual salary median amounted to $46,750 per annum. Other non-salary benefits for junior lawyers were on top of these base rates.
Better rates in other professions
In LawTalk 932, September 2019, Kirsty Spears, the director of McLeod Duminy Careers said the legal profession is generally very conservative and starting salaries are “surprisingly low”. Graduates are paid $40-$50,000 per annum “if they are lucky”, she said.
“Other professions such as accounting or engineering pay a lot more. Law firms compare themselves to other law firms, when they should be comparing themselves to other industries. If you are not paying enough, or are not flexible enough, or not offering attractive benefits then this is a risk.
“I have had a lot of conversations with law firms who seem to be happy to be ‘in the market’. But as they set their own ‘market’ this means that salaries and benefits are often not very exciting. Only a handful of firms compare the salaries they offer to other professions outside the law, but there is no real shift or change in that overall.”
‘Driving people out of the industry’
The Co-President of the ALWU, Morgan Evans, says the salaries of junior lawyers are often too low. “For example, the amount that junior lawyers earn per hour is nowhere near commensurate to their charge-out rates.”
The New Zealand Law Society Niche Survey shows that the charge-out rate for those with less than one year experience is $190 on average; for two years it is $236, and rises to peak at $363 per hours for those with nine years’ PQE.
“At large firms, the charge out rates start out at about $150 to $200 per hour but by your fourth year it is significantly higher,” he says.
“In contrast, when their fortnightly salary payments are divided by the hours they are working, ALWU’s survey shows that many junior lawyers are working close to or below the minimum wage. Clearly it isn’t fair to junior lawyers to be paying them less than $17.70 an hour for an hour of work that earns their employer ten times that amount.”
He says the union is making headway in improving the lot of young and new professionals by using Minimum Wage Act compliance to start a conversation about accurate time recording and compensation for hours worked.
“In our initial conversations with firms we raised the issue of potential minimum wage breaches. We explained that, in order to comply with the Minimum Wage Act and regulations, at the very least you need to pay employees a fortnightly salary that, if divided by the number of hours they have worked in that fortnight, is greater than the minimum wage.
“Following on from those conversations, we’ve launched a minimum wage best practice policy and asked large firms to provide us with a plan for compliance by 1 April. In our view, the ‘best practice’ way to ensure minimum wage compliance is to have a system that records all of the hours that employees are working and to pay them overtime for hours worked over and above their contracted hours. That said, wholesale salary increases would also go a long way toward addressing the issue.”
Mr Evans says most of the firms they have talked to have asked their accounts departments to go back, in some cases as far back as six years, to check their time and wage records to see whether any employee had earned less than the minimum wage over that period of time.
“Where they have identified breaches of the Minimum Wage Act, firms have paid top-ups to staff and they are now monitoring hours worked and paying top-ups on an ongoing basis. However, those top-ups only ensure that employees are paid the minimum wage for each hour they work – a wage that they could be getting working in a fast-food restaurant.”
Mr Evans also takes issue with the ‘work hard now, reap the benefits later’ mantra.
“What you’re seeing is, yes, if you stick around long enough you will have the chance to earn decent money but actually you’re getting paid a pittance in your first few years in the profession after five or even six years of study. These are people who are earning their firm five or six times what they are actually getting paid – even after write-offs.
“That’s driving people out of the industry. We are aware of many talented people who have left the profession because of the long hours and low wages.”
Good programmes and cultures
Mark Henderson, a partner at Corcoran French and the board chair of NZ LAW, an association of independent legal practices, when asked if the average salaries for those in the first five years of working in the profession reflect the worth of such employees, answered “generally yes”.
But he says that pay is not the only element to creating a good work environment.
“The transition from university to work in firms and in-house is in most cases a steep learning curve. It can take time for junior solicitors to learn the necessary skills to be good lawyers,” he says.
“In saying that, those employers who employ junior solicitors, need to ensure that they have good programmes and cultures in place to support their advancement both in career and in terms of remuneration.
“While we at NZ LAW agree that level of remuneration is important, it is however only one component. Ensuring that junior solicitors are mentored and supported well in their first years of employment is also critical,” Mr Henderson says.
“Flexibility in terms of work location, hours, and technology are some of the things now needed. Junior solicitors also need to know that they work in firms that have a positive culture and where their wellbeing is prized and looked after. When there are periods during which lawyers need to work longer hours, then certainly that should be recognised by their employers. These are all harder areas to get right than just annual remuneration, but are the areas that New Zealand legal employers need to devote their attention to.”
Mr Henderson added that he found the results of the ALWU survey “grim reading” and that working for less than the minimum wage when total hours worked is taken into consideration was “not acceptable”.
“Our work as lawyers often involves urgent and stressful work and longer hours. It is necessary to monitor this for our junior lawyers, and ensure that suitable measures are in place to recognise that when they do so. Paying money to staff based on hours is not a complete answer.
“Providing time in lieu, being flexible about time away from the office or away from work more generally, recognising hard work, and ensuring that there is transparency as to how all this will occur before it does are more likely to ensure lawyer job satisfaction and will be more realistic for how law firms operate. Those type of incentives also allow junior lawyers to be able to properly engage in their social lives outside of work and help our communities.”
Mr Henderson pointed out that NZ LAW has a large range of initiatives to help junior lawyers and other young legal professionals including:
- a full training and conference programme that includes learning conferences for junior solicitors, senior solicitors, legal executives, and general conferences;
- access to question and answer online forums to assist staff in their work;
- special interest groups, for example, in trust law which is “especially popular, and helps all of our lawyers with the specialised knowledge and precedents required for trusts”;
- and a women in law special interest group that raises and discusses issues relevant to how women practise law.
A supportive working environment
Andrew Poole, Chief Executive at MinterEllisonRuddWatts says the firm aims to ensure its younger staff members are remunerated for their hard work.
“We acknowledge the importance of a supportive working environment for our staff, and work hard to create a culture that supports everyone to be their best.
“Looking at the ALWU survey, the summaries of salaries and conditions in the report are broadly correct, however our firm’s third year salary is in a higher range. Having just completed our annual salary review, the information reported is now out of date.
“Like all businesses, we operate in a competitive environment, and aim to attract, develop and retain graduates and lawyers who can best serve our clients’ business needs. There are times when work outside of core hours is required to meet these needs, however we have programmes in place to recognise and reward our people for their efforts and to support their wellbeing – both professional and personal.”
In Australia, the situation appears to be moving quicker, and as of last month, law firms are required to log the number of hours worked by graduate lawyers and paralegals to ensure young staff are being appropriately remunerated.
The rules, which have been approved by the Fair Work Commission, require firms to conduct annual pay reconciliations and advise lawyers of maximum hours they can work under salary before they are entitled to overtime or penalty rates
“Due to the nature of legal work, with duties to the court and obligations to clients, lawyers, including graduates, can experience periods of high pressure or stress and long work hours,” says Law Council of Australia President Pauline Wright.
“It is important that these lawyers are properly and appropriately remunerated for the work which they perform and that their health and safety is monitored and supported. The health and wellbeing of lawyers is a key focus of the Law Council.
“The Law Council is currently working with its members to investigate whether adjustments to the Legal Services Award could address any underpayment or wage level issues of early career admitted lawyers early in their careers.”