Who sets salaries in big law - why the discrepancy between markets?

[Swami]

Was wondering who sets the salaries? Why is there such a huge discrepancy between markets?

Using Fasken as an example, below are the salaries (articling, 1st year) for each market:

Vancouver: 65k, 115k

Calgary: 80k, 95k

Toronto: 98.8k, 130k

Data taken from NALP.

I understand market factors can have an effect on salary, but it doesn't make sense to me. The COL in Vancouver is arguably higher than in Toronto, yet there is quite a big difference between salaries? 65k doesn't go far in Vancouver, and from what I understand, this number has remained unchanged for at least 5 years. Also, don't associates at national firms all do similar work at the same high caliber? Maybe I'm missing something and not seeing the full picture? Hoping someone can shed some light. 

[QMT20]

My understanding is lawyers in the Vancouver or Calgary office actually bill at lower rates than lawyers in the Toronto office of the same firm. That probably translates into lower salaries for associates and students at those offices as well. 

The other aspect is that law firms are ultimately for-profit businesses. They won't accrue more costs (such as salaries for staff) than they have to. If they can get away with paying a lower base salary in Vancouver and Calgary than in Toronto, they will do that. Inertia will then take care of the rest because most of the firms won't increase their salaries unless firms they view as their direct competitors increase first. 

[QueensDenning]

I know Cassels pays the same nation wide. 

[lawfacade123]

I've been told that West coast generally bills lower and also in Vancouver you get 115k for a 'stub year' which starts when you get called (likely May or August) and then you get bumped to second year salary (127k) beginning of the next calendar year. I think in Toronto you're at first year rate for an entire year. 

There's not a huge justification for the articling salary. Regional firms have bumped to 75k, but so far no national ones that I'm aware of. 

[Swami]

3 hours ago, QMT20 said:

My understanding is lawyers in the Vancouver or Calgary office actually bill at lower rates than lawyers in the Toronto office of the same firm. That probably translates into lower salaries for associates and students at those offices as well. 

The other aspect is that law firms are ultimately for-profit businesses. They won't accrue more costs (such as salaries for staff) than they have to. If they can get away with paying a lower base salary in Vancouver and Calgary than in Toronto, they will do that. Inertia will then take care of the rest because most of the firms won't increase their salaries unless firms they view as their direct competitors increase first. 

ah the billing part makes sense - I thought that rates were pretty standard across offices but I guess not...

hopefully firms in Vancouver increase soon to keep pace with inflation etc.

[Anonymous]

I am on the student committee at the Vancouver office of a large firm, and we regularly discuss the current articling salary and whether to move. I can't speak for other firms, but offer some insight from my own discussions and experiences over the years. I expect to get skewered, but I think it's an important perspective to share.

While I anticipate we will move sooner than later, there has been a resistance to increasing articling salaries for a variety of reasons, not the least of which is that students seem to be working less and asking for more. In the past 3-4 years, many of our Vancouver students regularly docketed hours that would not approach target had they been an associate, and this is taking into account non-billable time as well. This is not our experience in other markets, where students and associates are working to capacity. This is often coupled with poor attitudes and little appreciation for the effort and investment that goes into supporting students (unfortunately noted by support staff as well as lawyers), as well as an inflated sense of their own economic value at this early stage. It creates frustration and a resistance in the partnership to throw more money at them.

There is also a feeling that there's a lack of understanding among students as to the business side of running a firm, which is frustrating as this is a business oriented profession. Students bill out at a relatively low rate, and much of their time is written off as it is essentially a training exercise and we can't justify billing our clients for the time it takes a student to learn, or when that work has to be redone by someone else. High rents, etc. in Vancouver are not just limited to residential, but of course to commercial leases as well, and the costs of running a large office are increasingly huge, particularly now that we are maintaining office space and support for all lawyers and students while also providing them the infrastructure and option to work remotely. Students do not generally make us money, and we understand this as part of the investment we are making in our future lawyers; that said, since our market won't accept increased billable rates, raising articling salaries is a sunk cost.

[CleanHands]

4 minutes ago, Guest Anonymous said:

-Snip-

I wish I could give a "like" for this. Thanks for the insider take and the firm perspective. It's a nice counter-balance to the endless griping from students who overvalue their work, which is prevalent on forums like this because those people are way more inclined to post their takes on social media than people in positions such as yours.

[Swami]

45 minutes ago, Guest Anonymous said:

I am on the student committee at the Vancouver office of a large firm, and we regularly discuss the current articling salary and whether to move. I can't speak for other firms, but offer some insight from my own discussions and experiences over the years. I expect to get skewered, but I think it's an important perspective to share.

While I anticipate we will move sooner than later, there has been a resistance to increasing articling salaries for a variety of reasons, not the least of which is that students seem to be working less and asking for more. In the past 3-4 years, many of our Vancouver students regularly docketed hours that would not approach target had they been an associate, and this is taking into account non-billable time as well. This is not our experience in other markets, where students and associates are working to capacity. This is often coupled with poor attitudes and little appreciation for the effort and investment that goes into supporting students (unfortunately noted by support staff as well as lawyers), as well as an inflated sense of their own economic value at this early stage. It creates frustration and a resistance in the partnership to throw more money at them.

There is also a feeling that there's a lack of understanding among students as to the business side of running a firm, which is frustrating as this is a business oriented profession. Students bill out at a relatively low rate, and much of their time is written off as it is essentially a training exercise and we can't justify billing our clients for the time it takes a student to learn, or when that work has to be redone by someone else. High rents, etc. in Vancouver are not just limited to residential, but of course to commercial leases as well, and the costs of running a large office are increasingly huge, particularly now that we are maintaining office space and support for all lawyers and students while also providing them the infrastructure and option to work remotely. Students do not generally make us money, and we understand this as part of the investment we are making in our future lawyers; that said, since our market won't accept increased billable rates, raising articling salaries is a sunk cost.

this is amazing insight! thank you so much. 

what you say makes sense - firms are investing in us and we are there to learn. I guess it's difficult to strike a balance between wanting to get paid more and bringing enough value to the firm as an articling student. It makes me wonder how 1st year associates in NYC biglaw get paid SO much but aren't they essentially students as well for the first year? I'm guessing the firms in NYC just have a lot more rev for them to pay students more? I'm assuming that commercial rental in NYC is as expensive if not more than in Vancouver. 

[pastmidnight]

1 hour ago, Guest Anonymous said:

I am on the student committee at the Vancouver office of a large firm, and we regularly discuss the current articling salary and whether to move. I can't speak for other firms, but offer some insight from my own discussions and experiences over the years. I expect to get skewered, but I think it's an important perspective to share.

While I anticipate we will move sooner than later, there has been a resistance to increasing articling salaries for a variety of reasons, not the least of which is that students seem to be working less and asking for more. In the past 3-4 years, many of our Vancouver students regularly docketed hours that would not approach target had they been an associate, and this is taking into account non-billable time as well. This is not our experience in other markets, where students and associates are working to capacity. This is often coupled with poor attitudes and little appreciation for the effort and investment that goes into supporting students (unfortunately noted by support staff as well as lawyers), as well as an inflated sense of their own economic value at this early stage. It creates frustration and a resistance in the partnership to throw more money at them.

There is also a feeling that there's a lack of understanding among students as to the business side of running a firm, which is frustrating as this is a business oriented profession. Students bill out at a relatively low rate, and much of their time is written off as it is essentially a training exercise and we can't justify billing our clients for the time it takes a student to learn, or when that work has to be redone by someone else. High rents, etc. in Vancouver are not just limited to residential, but of course to commercial leases as well, and the costs of running a large office are increasingly huge, particularly now that we are maintaining office space and support for all lawyers and students while also providing them the infrastructure and option to work remotely. Students do not generally make us money, and we understand this as part of the investment we are making in our future lawyers; that said, since our market won't accept increased billable rates, raising articling salaries is a sunk cost.

This is very interesting — do you think that the shift you’ve seen over the past few years is related to the cost of living in Vancouver/COVID/something else I’m not considering, or is it because students are aware of how much their peers are making in Toronto (or Calgary)? I’m struggling to understand not being able to wait a year to go from making $65,000 to $115,000, as sympathetic as a I am to the cost of living here. 

[Pantalaimon]

1 hour ago, Guest Anonymous said:

In the past 3-4 years, many of our Vancouver students regularly docketed hours that would not approach target had they been an associate, and this is taking into account non-billable time as well. This is not our experience in other markets, where students and associates are working to capacity.

Interesting. I have to say that the Vancouver students seemed like some of the busiest at our firm (although I'm obviously not on the inside, as anonymous is). So this part of the rationale might not extend to the entire market.

[JackoMcSnacko]

1 hour ago, Guest Anonymous said:

In the past 3-4 years, many of our Vancouver students regularly docketed hours that would not approach target had they been an associate, and this is taking into account non-billable time as well. This is not our experience in other markets, where students and associates are working to capacity.

Just stating the obvious for others reading this thread, obviously this is firm specific.  For example this wasn't my experience at my firm when I compared myself as a student to our other offices (and later comparing other cohorts of students).  Yes, there is some difference in lifestyle (among other factors) between different cities, but the difference is not properly reflected when comparing the Vancouver articling salary to the other cities.  I'd say the 1st year associate salary difference is more reflective of true market value in each of the cities.

 

1 hour ago, Guest Anonymous said:

This is often coupled with poor attitudes and little appreciation for the effort and investment that goes into supporting students (unfortunately noted by support staff as well as lawyers), as well as an inflated sense of their own economic value at this early stage. It creates frustration and a resistance in the partnership to throw more money at them.

There is also a feeling that there's a lack of understanding among students as to the business side of running a firm, which is frustrating as this is a business oriented profession. Students bill out at a relatively low rate, and much of their time is written off as it is essentially a training exercise and we can't justify billing our clients for the time it takes a student to learn, or when that work has to be redone by someone else.

Sounds like the issue rests on your firm in managing attitudes and expectations rather than the other way around.  I agree students can start out in the way you mentioned, but most students I've experienced adjust quickly to become contributing members of the firm given the right training and communication. 

[Pantalaimon]

9 minutes ago, JackoMcSnacko said:

 I'd say the 1st year associate salary difference is more reflective of true market value in each of the cities.

After stub year we're ultimately talking about 127k vs 130k if @lawfacade123's 2nd year Vancouver number is accurate (I have not been following Vancouver).

[JackoMcSnacko]

2 minutes ago, Pantalaimon said:

After stub year we're ultimately talking about 127k vs 130k if @lawfacade123's 2nd year Vancouver number is accurate (I have not been following Vancouver).

+ bonus, + the amount you don't get because of the stub year, and taking COL into consideration. 

Edited August 24, 2022 by JackoMcSnacko

[99problems]

3 hours ago, Guest Anonymous said:

-snip-

Is it true that, as a general rule of thumb, the salary offered to articling students and associates is one-third of their billing rate times the billable target?

[ramoj]

16 minutes ago, 99problems said:

Is it true that, as a general rule of thumb, the salary offered to articling students and associates is one-third of their billing rate times the billable target?

No - let's assume articling students are being charged out at $250 per hour at 1,800 hours a year. That's $450,000. Divide by 3 is $150,000. I think my assumptions are not as generous as some are billed out at (ie. north of $300).

[Pantalaimon]

Even if a student billed 1,800 hours, the firm would write off a significant portion of that as it's the students' learning not justifiable time.

[Vizslaw]

Not big law but can confirm some of the comments above. We write off a significant portion of our articling student's billable hours.  Artcling students are usually, from a financial perspective, a break-even proposition at best.

I've also never liked the look of huge dockets from students on client invoices because of a perception some clients have that we are spending more time than necessary on their file(s). So if a student spent 15 hours researching some legal issue and writing a memo, I'm probably going to cut that down to 2-3 hours that we actually bill the client. In some other cases, if it's a good idea for the client to see how much time was spent, we can include the full docket but have some or all of it billed as 'no charge'. 

 

Edited to add: Do articling students really bill out at $250/hour in big law? Whoa.

Edited August 25, 2022 by Vizslaw
#reasons

[ZukoJD]

16 hours ago, Guest Anonymous said:

I am on the student committee at the Vancouver office of a large firm, and we regularly discuss the current articling salary and whether to move. I can't speak for other firms, but offer some insight from my own discussions and experiences over the years. I expect to get skewered, but I think it's an important perspective to share.

While I anticipate we will move sooner than later, there has been a resistance to increasing articling salaries for a variety of reasons, not the least of which is that students seem to be working less and asking for more. In the past 3-4 years, many of our Vancouver students regularly docketed hours that would not approach target had they been an associate, and this is taking into account non-billable time as well. This is not our experience in other markets, where students and associates are working to capacity. This is often coupled with poor attitudes and little appreciation for the effort and investment that goes into supporting students (unfortunately noted by support staff as well as lawyers), as well as an inflated sense of their own economic value at this early stage. It creates frustration and a resistance in the partnership to throw more money at them.

There is also a feeling that there's a lack of understanding among students as to the business side of running a firm, which is frustrating as this is a business oriented profession. Students bill out at a relatively low rate, and much of their time is written off as it is essentially a training exercise and we can't justify billing our clients for the time it takes a student to learn, or when that work has to be redone by someone else. High rents, etc. in Vancouver are not just limited to residential, but of course to commercial leases as well, and the costs of running a large office are increasingly huge, particularly now that we are maintaining office space and support for all lawyers and students while also providing them the infrastructure and option to work remotely. Students do not generally make us money, and we understand this as part of the investment we are making in our future lawyers; that said, since our market won't accept increased billable rates, raising articling salaries is a sunk cost.

Aren’t law firms notoriously awful at training their students and juniors? Is it not trial by fire for the most part? It seems disingenuous to slag off students for producing poor outputs while simultaneously giving them inadequate training. 
 

Your point about costs also rising for law firms rings a bit hollow as well. IIRC, big law firms have been making a killing in recent years. Meanwhile, students are facing unprecedented levels of law school debt along with the inflated COL. I’m no economist, but does inflation not have disproportionate effects for lower income individuals? At best it seems unfair to shrug off increased COL for students on the basis law firms are experiencing an increased cost of doing business, especially when considering large law firms have been doing quite well recently. 

I’m also genuinely curious if when doing your analysis of student worth you factor in something like “time freed up for partners/associates to bill more.” In my limited experience the work students do can often be time-consuming, tedious work, even when accounting for the learning curve. It seems to me that a full analysis of whether students bring a net benefit to a firm would have to account for the metric I mentioned. I suppose that metric could be offset by “time teaching students” though. 

Your points about your students’ attitudes could very well be true. However, I will say that some amount of griping seems justified given increases in tuition and COL, and the fact that a significant amount of stress students face could be mitigated with some proper training. 

[ramoj]

25 minutes ago, Vizslaw said:

Not big law but can confirm some of the comments above. We write off a significant portion of our articling student's billable hours.  Artcling students are usually, from a financial perspective, a break-even proposition at best.

I've also never liked the look of huge dockets from students on client invoices because of a perception some clients have that we are spending more time than necessary on their file(s). So if a student spent 15 hours researching some legal issue and writing a memo, I'm probably going to cut that down to 2-3 hours that we actually bill the client. In some other cases, if it's a good idea for the client to see how much time was spent, we can include the full docket but have some or all of it billed as 'no charge'. 

 

Edited to add: Do articling students really bill out at $250/hour in big law? Whoa.

The $250 figure was an assumption, based off of what some students have told me they are being billed out at as they complete 2L summers at the Seven Sisters.

Would assume articling students are higher rate than summer students, etc. 

[BlockedQuebecois]

36 minutes ago, ZukoJD said:

Aren’t law firms notoriously awful at training their students and juniors? Is it not trial by fire for the most part? It seems disingenuous to slag off students for producing poor outputs while simultaneously giving them inadequate training. 

Most big law firms have pretty decent training, in my experience and the experience of my peers. A lot of this job can only really be learned by doing, but most firms invest a lot of time in making sure their students are set up for success in both the short and long term. 

If anything, my complaint about training during the summer was that I received far too much of it in far too much breadth. I didn’t need to learn about Closing Folders or Clio because I’ve never been on a closing and have never done due diligence. 

Even then, though, enough of my friends switched areas of interest mid-summer that I can see why firms need to teach all their students how to use all the tools they might need. And at almost every firm you’ll need to rotate through areas, so breadth of knowledge is important.

With that said, if you end up getting a job at a big firm and you think there are feasible ways student training can be improved, you should raise it with the student coordinator. Most of them are sincerely invested in their students’ success, and they’ll be very receptive to new ideas that can work towards that goal. 

Edited August 25, 2022 by BlockedQuebecois
Homophones are hard

[ZukoJD]

6 minutes ago, BlockedQuebecois said:

Most big law firms have pretty decent training, in my experience and the experience of my peers. A lot of this job can only really be learned by doing, but most firms invest a lot of time in making sure their students are set up for success in both the short and long term. 

If anything, my complaint about training during the summer was that I received far too much of it in far too much breadth. I didn’t need to learn about Closing Folders or Clio because I’ve never been on a closing and have never done due diligence. 

Even then, though, enough of my friends switched areas of interest mid-summer that I can see why firms need to teach all their students how to use all the tools they might need. And at almost every firm you’ll need to rotate through areas, so breadth of knowledge is important.

With that said, if you end up getting a job at a big firm and you think there are feasible ways student training can be improved, you should raise it with the student coordinator. Most of them are sincerely invested in their students’ success, and they’ll be very receptive to new ideas that can work towards that goal. 

It's nice to hear this, because this runs contrary to pretty much everything I've heard about big law training. 

[Panda]

2 hours ago, Vizslaw said:

Not big law but can confirm some of the comments above. We write off a significant portion of our articling student's billable hours.  Artcling students are usually, from a financial perspective, a break-even proposition at best.

I've also never liked the look of huge dockets from students on client invoices because of a perception some clients have that we are spending more time than necessary on their file(s). So if a student spent 15 hours researching some legal issue and writing a memo, I'm probably going to cut that down to 2-3 hours that we actually bill the client. In some other cases, if it's a good idea for the client to see how much time was spent, we can include the full docket but have some or all of it billed as 'no charge'. 

 

Edited to add: Do articling students really bill out at $250/hour in big law? Whoa.

At some firms, more.

[PzabbytheLawyer]

I think training would certainly vary at firms. Some firms are very trial by fire. Some firms spend a lot of resources on training (including formal workshops, as I understand it). Then there's everything in between.

Boutiques I would probably think lean more towards less training on the scale. And it comes down to time and resources. The larger the organization, the more capacity for training. This is true in most walks of life.

Now before I get skewered, I'm talking on average. Personally, some of my best training still to this date came from working for a sole practitioner for a summer. Some of my worst training came from a very established bay street firm.

 

 

[BlockedQuebecois]

When I say “big law firms”, I’m referring to the market leading firms like Blakes, Davies, Fasken, McCarthy’s, etc.. In essence, firms with several hundred lawyers and with at least a dozen students in Toronto each summer.

As far as I know, all of those firms invest a substantial amount of time and money into training their students. 

There are obviously a lot of firms that say they are “Bay Street” firms that only hire a handful of students and don’t invest much, if at all, in training. But those firms aren’t “big law firms”. They’re boutiques or mid-market firms, or even just mediocre firms that have a Bay Street address and trade off the name. 

[QueensDenning]

18 minutes ago, BlockedQuebecois said:

But those firms aren’t “big law firms”. They’re boutiques or mid-market firms, or even just mediocre firms that have a Bay Street address and trade off the name. 

Is Wildeboer in this category?