A GUIDE FOR LAWYERS
Preparing for Salary and
Performance Reviews
With 30 June rapidly approaching, lawyers across Australia are reviewing their salary expectations, setting their sights on promotional opportunities, and considering their career plans.
For many lawyers, salary and performance review discussions can be intimidating.
The thought of having conversations with senior stakeholders often brings up feelings of stress, anxiety, and dread. This is compounded by the lack of contextually accurate salary information available, and industry expectations that salaries are not openly discussed among peer groups.
But it doesn’t have to be this way.
With preparation and knowledge, salary and performance reviews are an excellent way to plan and drive your career.
To confidently navigate your way through the process, it’s important to understand your specific review process, how you are being measured, and ultimately, how your salary and promotions will be decided.
STEP ONE
Understand the process and how you will be measured
Every law firm and company measures performance differently, and as with any important conversation, preparation is key.
Regardless of whether your employer treats the review as a simple ‘check the box’ exercise, or engages in a more meaningful way, it’s an opportunity to reflect on your achievements, showcase your professional development, and demonstrate progress against any agreed key performance indicators (“KPIs”).
Step one is to be proactive and find out how you’re being assessed. To begin, we would recommend clearly answering the following questions:
What is the timing of your salary and performance review? Typically, a formal review occurs yearly (often around 30 June), although some employers have mid-year and quarterly check-ins to track and review progress.
How are the reviews carried out (i.e. what does the process look like, and is it formal or informal)?
What are your KPIs, how are they measured, and what weight is given to each metric for the purposes of salary reviews and promotions?
Is your financial metric a ‘minimum threshold metric’ (i.e. exceeding financial metric is often a prerequisite for pay rises, or promotions, or both)?
Does your employer benchmark against lawyers at your experience level within the business or across the market?
Who is involved in the process, and who makes the ultimate decision on pay rises and promotions?
Contrary to popular belief, lawyers should not necessarily expect salary increases simply because they have gained another 12 months’ post admission experience.
STEP TWO
Have you considered the common review factors?
Some KPIs and metrics will be linked to your specific role. However, other metrics are broadly applied across the legal industry to determine salaries and promotions.
These factors and metrics are considered below:
2.1 Legal market trends – salary data and market reports:
Employers typically reference salary data and market reports when determining salary levels for the upcoming year. That being the case, it’s useful to understand the broader context of what’s happening in the legal market and where you sit within that.
But… can you rely on salary data publications? Yes, and no.
Published salary data is generally accurate. However, what it doesn’t address is the context.
The question then becomes “what is the ‘market rate’ for a lawyer with your experience level, comparable technical expertise, similar responsibilities, and similar financial or performance metrics?”
Whilst the movement away from salary banding continues, with fewer and fewer employers being constrained by salary bands, it’s still important to be aware of what’s happening in the market more generally. Interestingly, businesses that are confined by salary banding may inadvertently retain their worst performers and lose their best-performing lawyers, who seek financial recognition elsewhere.
As a general rule, always compare apples with apples. For example, lawyers billing 25 hours per week shouldn’t expect the same salary increases as lawyers billing 40 hours per week.
In summary, salary guides are a useful starting point, but dangerous without context.
2.2 Financial metrics and billing targets:
Whether we like it or not, law firms and companies exist to turn a profit. With very few exceptions, financial performance is the single most important factor impacting pay rises and promotions.
In law firms, this generally means exceeding billing targets. For in-house lawyers, this may be linked to saving your company money by reducing external legal spend.
In addressing this key performance indicator, here are some tips to consider:
Be specific, and wherever possible, use data.
If you exceeded your financial targets, state by how much – both in dollar and percentage terms.
If you’ve contributed to increasing the firm’s revenue in other indirect ways, such as winning new clients or referring work to other teams, don’t forget to highlight that.
Junior lawyers often complete non-billable research and prepare presentations. Keep an accurate record of non-billable work when accounting for your time, particularly if you are only slightly below budget.
Be honest and accountable for any under-performance. Share any genuine explanations and speak to the strategies you have or will put in place to overcome any deficits.
In summarising this key factor, the more you exceed budget, the more likely you’ll progress ahead of your peers. Conversely, if your billings are below budget, salary and career progression may be slower than your colleagues.
2.3 Develop a commercial understanding – ratio of ‘salary to revenue/billables’:
As a guide, the ratio of ‘salary to revenue/billables’ should be revenue/billables in the vicinity of 3-4 x salary. Anything below is likely underachievement, and anything above may warrant a pay increase.
Junior lawyers often ask why this is the case.
Law firms generally need to recover 3-4 times your salary to cover your overheads, salary costs, and also make some profit. For this reason, firms are less concerned with time recorded as they are about time billed and banked, especially when it comes to pay rises.
2.4 Demonstrating improved technical expertise:
All lawyers should be able to effectively and efficiently complete the work allocated to them, in line with your level of experience. The more you can do with less supervision, the more valuable you become.
Ideally, you want to demonstrate increased technical knowledge since your last review. For example, you might demonstrate that you’re better able to manage matters and clients more autonomously, or can complete more complex tasks with less supervision.
2.5 Business development and networking:
Partners, Special Counsel, Senior Associates, and increasingly lawyers, may be recognised and rewarded for winning new work. For our in-house colleagues, this might involve developing strong relationships with key stakeholders, executive teams, clients, and service providers.
In preparing for your review, you may wish to articulate how you contributed to building your employer’s brand or developing relationships with clients and referral partners, including:
Business development activities and networking events attended.
Articles you have written for relevant industry publications.
Public speaking engagements.
Positive client feedback and emails, thank-you notes, reviews, and testimonials.
How much work have you generated over the review period?
How many new clients did you bring in?
Your university contacts, current clients, and LinkedIn are great ways to build your networks and referral sources. Consider getting involved with organisations like The Law Society, CA/CPA Australia, AMEC, AMMA, The Petroleum Club, FINSIA, CSA, etc. You may also consider engaging specialist business development coaches to assist and keep you accountable to developing a referral/business network.
If you’re aiming for partnership, demonstrating a transportable client base is always ‘mission-critical’.
2.6 Contributing to ‘people and culture’:
Over and above individual KPIs, promotions can be linked to metrics which benefit the business more generally.
Some areas you may wish to highlight include:
Do you collaborate well with others in your team and the wider business?
Do you contribute meaningfully to meetings and bring new ideas to the table?
Have you been involved in internal committees, social activities, and mentoring?
These contributions are sometimes overlooked when it comes to pay rises, but they can be important when it comes to promotions.
STEP THREE
Common pitfalls and practical tips
Lawyers, law firms, and companies provide us with regular feedback regarding common issues that arise during salary and performance review processes.
We have outlined some of them below, with practical tips to help avoid common pitfalls.
Be objective, not emotional.
Use data to demonstrate performance against metrics – you can’t argue with facts.
Clearly state what you are hoping to achieve, rather than asking for “whatever you think I deserve”.
Don’t use “my friend at ABC firm gets paid more” or “I’ve heard that Associates at XYZ firm get paid this much…”. This generally doesn’t end well.
Don’t threaten to resign if you don’t get a pay rise. This might work in the short-term but, in almost every case, is a poor long-term strategy. It undermines your relationship with your employer and creates trust issues. It may also damage your reputation – the legal industry is small, and your reputation is your most important asset.
Don’t assume you (or your employer) will remember your achievements when review time comes. Keep track of your accomplishments throughout the year in real-time. A good practice is to keep it all in one place – create a folder in your inbox or personal drive or use a Word document or OneNote. Add to this document every time you receive positive feedback or achieve something notable, as well as when you receive constructive feedback and the progress you’ve made to improve. You can then use this information to substantiate your salary expectations.
Set clear performance goals for the year ahead. Ensure they are agreed in writing so there’s accountability both ways. This will ensure next year’s salary and performance review is well-informed, open, transparent and based on agreed KPIs.
Finally, maintain regular check-ins throughout the year. This is the joint responsibility of the lawyer and the employer – drive your career and don’t let your career drive you.
Ultimately, discussions around salary should be well-informed, open and transparent, based on measurable KPIs and produce a result that is fair for both the employer and employee.
STEP FOUR
Salary reviews – how do you bring it all together?
Performance reviews can be like tennis – it’s easier to serve than to return.
Make sure to present your case based on evidence and merit. This is where the preparation above will pay off – in building a strong, evidence-based case.
When setting your own salary expectations, we would suggest using the following approach:
Start with your salary to revenue ratio to ensure your expectations are realistic. This is linked to the key factors of time billed vs budget, and your charge-out-rate.
Consider the ‘market rate’ for a lawyer of your level. Consult salary guides and ask recruiters for current information about salaries for lawyers in comparable roles at comparable firms.
Consider your technical expertise, BD contributions, networking efforts, and autonomy as compared with this time last year.
Use examples to demonstrate your achievements over the review period as well as any challenges you have faced. As an example, you may refer to a major project or client engagement that you delivered ahead of time and under budget.
Performance discussions can be daunting. But with the right preparation, you can level the playing field to ensure a fair outcome for everyone involved.
For those lawyers who are still early on in their careers, try to remember where you are heading in the longer term. If you are learning and developing skills in a positive environment, you are gaining significant long-term value. If you focus on building your technical ability and client facing skills, the money and promotions will come.
Would you like personalised advice?
If you’d like to understand how this advice relates to your practice area and specific circumstances, our team would be happy to arrange a coffee to discuss tailored insights and provide some guidance.