When you employ law firm employees, the question often arises about what is the kind of raise employees should be given. Oftentimes, the question can arise at the end of the year because many employees expect yearly raises.
The question of what is the average raise is problematic. Law firm employees often have expectations. Many of these expectations are not realistic when looking at national data and the finances of the firm.
It is true as well that while clients want to pay less in fees, employees want to make more. This is a catch-22 that is almost impossible to resolve.
Many of these employees who also want raises do not meet their billable bout or accounts receivables numbers, either. If they do not get it, many will be upset. Some will just grovel about it. Others may leave.
To know whether your raises are within the norm, looking at national averages can be helpful. Recent studies show that the average raise is in the 2.6 to 4.7 percent range. While this might not warm the hearts of some employees, the numbers make sense when you really think about it.
After all, how does a company generate more money to pay raises larger than that? To pay even 2.6 to 4.7 percent t raises, they have to minimally increase the company’s profits by the same 2.6 to 4.7 percent. That’s not easy for most law firms. Some law firms might have income and profits that are steady (versus increasing). Some law firms could even have down years when it drops. For those firms, how do they give any raises?
Expenses also go up yearly in most law firms. For example, rent can increase. Overhead can go up as other vendors raise their rates and charge more. Thus, to give a 2.6 to 4.7 percent raise, the profits and income of the firm probably need to exceed this range.
In the end, you have to try to set reasonable expectations within your law firm. You also cannot raise salaries above a number where the firm will not be able to pay it. If you do, you will put the firm in a bad financial footing that can ultimately impact all the employees if the firm’s obligations cannot be met.
If some employees choose to leave, or grovel about it, it sort of goes with the territory of having a law firm. Try as you may, this is an area where it’s almost impossible to make everybody happy.