One of the
major challenges for small firms is the compensation it can offer staff. Anecdotally,
small firm compensation is typically lower than that of larger firms. Nonetheless,
any lawyer — whether employer or employee — assessing proposed compensation
must conduct an honest cost-benefits analysis to determine whether it’s worth working
at a particular firm, large or small.
The Associate’s Perspective
lawyers are faced with the grim reality that not everybody strikes it rich
straight out of law school. Starting small firm salaries can be in the range of
$30,000 to $40,000, if not lower. Some firms may only be able to offer
part-time employment. Other compensation scenarios are based on an
“eat-what-you-kill” model, meaning that you get a percentage of the revenue you
compensation may be a tough pill to swallow, particular for those carrying
massive student loans or trying to save for a down payment on a house. Moreover,
there is a time value to money, meaning that agreeing to a lower salary results
in forgoing some compounding effects time has on money invested.
firm compensation may be lower, the non-monetary factors of a particular firm
may offset that. The firm’s reputation, the availability of quality lawyers who
can offer valuable mentorship, the opportunities for growth and perks such as
covering fees and dues, funding for CPD programs or memberships or medical and
dental benefits may be offered. There is also the fit between you and the firm
to consider, as it might be that the small firm environment is perfect for
As part of the
cost-benefits analysis, also consider the long game. While paying off debt is
undeniably important, building a solid foundation for your career is also
important. If a small firm can assist in building proper career fundamentals,
that will pay great dividends in the long run.
this is not to mean that one should sell themselves short or stay loyal to a
situation where there are dwindling benefits. As such, it is important to
conduct the cost-benefits analysis regularly.
The firm’s perspective
At some point
in time, the small firm lawyer will need to put their mind toward hiring staff.
This is undoubtedly nerve-wracking as there must be constant and sufficient
cash flow to honour wage obligations. Moreover, paying a fair and market-rate
compensation while offering attractive non-monetary benefits is necessary to
retain competent staff that you like. Further, structuring compensation in a
way that incentivizes an associate to achieve goals is necessary to ensure they
are not simply a drain on your cash flow.
With cash flow
being a factor, hiring an associate, especially a junior one, can be risky as
they may not generate sufficient profits to pay for themselves. At the early
stages, the cost of the associate may far outweigh the benefits.
employee, the employer should regularly conduct an honest cost-benefits
analysis for everybody on their team. While costs can be seen in purely
financial terms, also consider non-financial factors. Examples include the
impact a particular person has on office morale, productivity and other metrics
that are important to you. While the associate may not be directly generating
profits in their name, they may contribute to an increase in your firm’s
profitability by assisting on files, helping manage staff and other aspects of
the firm and freeing up your time to focus on higher-value work. This also
highlights the importance of keeping track of profitability year over year and
setting time aside each year to assess factors that increased or decreased
are an employer or associate, conducting regular cost-benefits analysis of your
compensation situation is important to the health of your practice. Ignoring this
exercise is a path toward stagnation and higher long-term costs that can
undermine your career objectives.