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SAM was the only tier 1 firm who participated in the survey, but I believe the billing rates would be somewhat similar across all tier 1s, and hence the calculations here will be an extrapolation from SAM's figures. Anyway, here are some interesting figures from the survey:
SAM's Hourly Billing Rates (in USD):
Junior Associate: 200 - 290
Senior Associate: 325- 400
Junior Partner: 425 - 450
Senior Partner: 450 - 500
Managing Partner: 550 - 750
The report also specifies the firm-wise split between hourly billing arrangments vs. alternative (i.e. lump sum) billing arrangements. SAM hasn't provided its data on this, but smaller firms like Spice Route, Rajani, Parinam have 60%-75% of their total revenue coming in from hourly billing arrangements. For the sake of calculation, let's make a conservative assumption that SAM's (or any other tier 1) also has 60% of its total revenue coming in from hourly billing arrangements. Also, let's assume that the revenue coming in from alternative billing arrangements would be 50% of what the firm would have otherwise earned had it followed the hourly billing arrangement.
Let's do the calculation for A0s. Let's assume a 10 hour workday for 24 days of the month. Of this, 6 hours will be spent on hourly billing work (60% of 10), and the remaining 4 hours on assignments which have alternative billing arrangements. With the above assumption that alternative billing arrangements would only yield 50% of the revenue that would have otherwise been earned had it been based on hourly basis, we'll add only 2 of these 4 hours to our calculations (Note: I do know that Associates also spend quite a bit of time on non-billable matters like knowledge management, but I've discounted for that by assuming a 10 hour workday with 6-7 days off each month, which is hardly the case at any tier 1. Thus, for the calculation, I will use an 8 hour workday.
Thus, the annual revenue generated by an A0 at a Tier 1 for her/his firm will be:
= 200 (USD) * 70 (Exchange Rate, USD to INR) * 8 (hours per day) * 24 (working days per month) * 12 (months)
= INR 3,22,56,000 (Three Crore Twenty Two Lakhs Fifty Six Thousand Rupees)
In 2019, the best A0 at any tier 1 would have at most gotten INR 16 lpa including bonus. This would be 5% of the revenue generated by the A0 for the firm during the year. Your firm takes a 95% cut of the revenue generated by you. Yes, we are underpaid. Don't let the extra 2-3 lakhs of bonus, or the free vaccines make you feel like you're firm's management is the most generous employer in the world.
In a completely different universe, Onlyfans takes a 20% cut from it's models' revenues, Youtube takes 30% from Superchats, OML takes 30% from its artists, and Stripchat takes 50%. I know this doesn't serve a relevant context at all, but I just found it interesting anyway.
P.S. This report was published in 2019, and the billing rates may have increased by 10%-15% by now.
About the point about entitlement, yes, now after reading my post again (especially the part about being underpaid), I do feel my writing comes of as that of an entitled jerk.
A 12-13 lpa paycheck for a 24 yo is definitely quite generous in almost any city in India, except perhaps Mumbai, with the sky-high rents. Rather than increased pay though, what I'd like firms to rather do is some/all of the following things:
1. Have a separate knowledge management team that actually does a decent job. There's a lot of duplication of work going on currently. Different teams are making the same labour law checklists for DDs every other month. This duplication can certainly be avoided. Also. firm-wide reference documents can come in quite handy, and save time and increase efficiency.
2. Hire some decent project management folks who can co-ordinate between and within teams on larger transactions, rather than having every client email being sent to every member of every team.
3. Subscribe to applications that help in document management, due diligence, etc. There are quite a few out there that do a good job. Indian law firms don't even have access to secure OCR softwares. While doing DDs, we have to spend quite a lot of time typing out paras from agreements into DD Reports as most documents in the data room are scanned ones which cannot be copy-pasted.
4. Give us decent laptops, better ergonomic chairs, rather than going for the cheapest ones that you can find. And yes, get a better IT support team. Can't speak about all firms here, but my firm's is definitely behind the curve.
5. Upgrade your capabilities and stop the lobbying to prohibit foreign firms from entering the country. All this time, I used to think that Indian firms really lack the resources to adopt these measures to become more efficient. Turns out that that is not the case, it's just that the promoters find it much easier to engage in crony capitalism and buy apartment with better views, than make their organisation better.
Anyway, this is simply wishful thinking. I can already anticipate replies along the lines of 'who are you to tell others how to run their firm', 'if you don't like how things are, why don't you just quit and start your own firm'. Maybe I will, in a few years, if I still find law interesting. Or maybe I'll just become a yoga instructor instead.
Also, do you want to be paid on a per hour basis? Coz then that will be a wage rate much lower than the bill out rate to the client (you have to account for expenses of the firm, profits for owners, etc). AND, do you really want to be paid an hourly wage like workmen/ labourers?
While comparing it with online platforms may not be an accurate comparison, it is still indicative of the "slave away for me" attitude across Indian law firms. Going by the word of a UK law firm partner, the managing partners of Indian law firms make way more money than the highest billing partner of a UK law firm - given the disproportionately high amount of equity they continue to hold in their firms (almost 60-80% in some of the top 5-6 Indian firms).
While the justification that these managing partners would normally give is that these firms would be nothing without them - isn't that what every promoter of every company thinks? It is a known fact that getting clients in the Indian law firm circuit is majorly a factor of generational contact and family connections - an Adani would never come to you instead of going to Cyril Shroff. However, it is also a fact that most managing partner keep the status quo that way but not giving their associates any taste of business development.
If you are made slog at the cubicle for 12-14 hours a day, 7 days a week, you can do zilch about "making connections, building a clientele". After 7 years, when the PA gets promoted to partner, he cannot suddenly be expected to have skills that he hadn't even heard of earlier.
Very recently, Cyril Shroff commented on Trilegal being "a smaller platform". It was nothing more than an entitled statement [...] who has become so used to getting clients through three generations of family connections that he cannot see you rise by getting clients through your own merit.
You wouldn't even get a higher designation at CAM/SAM if you actually brought in a client as an associate. You will be seen as someone who violated the cardinal rule [...]. "Master, Oliver asked for more!"
[...] without any enterprise, it is only fair you are paid peanuts compared to what you earned for your master.
- write offs
- discounts given to clients
- time when you aren't utilized
- pro bono hours
- fixed costs (apportioned to you - rent, secretary, tech, furniture, depreciation on these)
- other capitalized costs (events, gifts, retreats, office repairs)
- variable costs (apportioned to you - finance, PR, HR, corp comm, KM, awards teams)
- 20% finder's fee (paid to who brings in the client)
- 20 days of paid leave given to you
- Indian clients who don't accept USD rates and accept only INR hourly rates
- certain practice areas (cap marks, banking & finance, project finance, secretarial, DD exercises) which pay fixed fees. At least 30-40% of hours get written off
- travel time gets written off
- time taken to familiarize a new resource mid-way into a matter gets written off
- reading time often gets written off
- A0, A1 and sometimes A2 do bad quality work in longer amount of time. So they get written off more. For example reviewing an SPA should take 2-3 hours by a SA, an associate will take 10-12 hours still do a bad job so SA needs to re-do
- A0, A1 and sometimes A2 require extensive instructions. This time is non-billable. It's a learning for you, clients don't pay for this. (they may pay for SA's time instructing you)
Revise the calculation and tell us the new ratio.
Also my dude, do you really think A0 is bringing even 65 percent of the figure you've just quoted. Come of my dude. There is a reason why firms are going through a very top heavy management crisis ..... situation.
Also my other dudes being mean, there is absolutely no entitlement here. My dude Ganit here is only trying to raise a very important issue of salary revisions which haven't really happened since 2016 pan tier 1 firms. I hope this gets traction and the Mota bhai's of amarchand wake up.
I largely agree with what you've said. Those billing rates do seem too good to be true, but then again, they've been provided by the firms themselves. They should have been more careful while providing the rates, and should have rather just mentioned the average rates charged by them during the last year, than just providing the highest rates paid by the marquee clients.
About the demand v. supply problem, I agree that overpopulation is a real problem here. However, do you think Indian firms can instead go the way that large IT companies have gone, by hiring more freshers and reducing their pay? The work done by A0s to A3s is mostly clerical anyway, and it's not like only the toppers from the best law schools can do the job well. Reducing the pay and instead investing it in training freshers for the initial 1-2 months would be better right?
[Note for LI mods: Please complete the moderation of my 426-word comment posted 21 hours ago in reply to comment 2. That should clarify quite a few things that I've left out in my main post. Thanks!]
Are you an intern who happened to assist in the preparation of a mandate?
Assuming a fairly average practice I'm going to apportion that about 20% of this revenue comes from foreign clients (paying the most conservatively low rate of USD 180 per hour) and the remaining 80% of this coming from Indian clients (paying again, the most conservatively low rate of USD 6500 per hour). Use these figures to calculate how many hours a week said A0 needs to work in order to recover this, with the assumption that this A0's team is generous and allows them to take two weeks in the year off (i.e. they put in productive hours for 11.5 months a year).
INR ((16,00,000/(180x72))/11.5)/4 = 2.7 hours a week
INR ((64,00,000/(6500))/11.5)/4 = 21.4 hours a week
This means that the average A0 needs to bill only about 24 hours a week in order for them to recover enough money to be profitable to the firm. Yet most A0s spend a multiple of at least 3x of that time in a week.
The question we really need to be asking ourselves is how do we solve for this time sink of about 45 hours a week when this time is apparently just going nowhere. The unit cost to produce one hour of A0 work is too damn high. And this figure is with some super generous assumptions. The likely required weekly billing is probably lower than that by 15-20%.
Ganit had some interesting suggestions and ya'll were just too pedantic to engage with them. Let's talk about how we can unlock value in firms. It helps everyone. Partners can keep their profits (and perhaps even grow them), and associates can retain their sanity. Leads to lesser attrition and lesser time on "training". And yet, we don't even have a conversation on how to make the model more efficient.
work quality is terrible. It has mistakes. Needs to be re-done.
A0 bills time when they are learning on the job, taking instructions. Why will clients pay for this.
These calculations don’t work for fixed fee mandates. Some practices are completely fixed fees while others are a mix. So overall 50-60% matters are fixed fees.
A0s pad their timesheets often to compensate for incapable junior partners who struggle to win enough work to meet team targets.
Poor quality of A0s. Better talent is going to litigation, academics, abroad. So A0s take longer to learn, get tired fast, whine and take longer to finish the deliverable. There may be few exceptions.
Not every A0 works 72 hours every week of every year. Work is cyclical. There are lean patches. Millennials need to be patient. Generally last 18 months have been exceptionally busy. However this will not last.
Too much info available at too early a time in their careers. Today first year law students / A0s are asking net worth of corporate lawyers by PQE. It’s deflating to know it will take 10 years to make your first 1-2 crores. Need to take it one day, one week, one month at a time.
On 1 and 2: Surely we are not the only profession that is a victim of India's piss poor education system? How have the others solved for this?
On 3: Yes, hence the 15 - 20% buffer and if you notice all my calculations are on the lower end. As an aside, there are also practices that work mostly on hourly mandates, why are their associates working 72 hours. Yes, practices subsidise each other, but that's equally a problem with the law firm model. For instance, a corporate partner who finds it within their realm of expertise to advise on tax or intellectual property with no prior experience makes his associates put in the work to figure that out and spend 15 hours extra, completely unaccounted for, with no repayment.
On 4: Even if they pad their time sheets, my calculation only accounts for time billed to the client. Not entered into your timesheet. Surely you don't meant to suggest that A0s are spending a whole bunch of time that they don't at all enter into their timesheets.
On 5: Lol, wasn't litigation complaining about the exact same thing? Which is true? Also, and if it is true, isn't that precisely the problem we're trying to solve for - shitty work life tradeoffs, inflated hours, and poor growth prospects push them away. Please also see 1 on this.
On 6: You're right not every A0 works 72 hours. Back when I was an A0 there have been months when I've worked 110 hour weeks. Work is cyclical sure, but it averages it self out to that hour figure over time.
Instead of resorting to the "oh these poo poo millennials are ruining my ability to exploit them like I was exploited" can we at least introspect on what we can do to make everyone's life better? Not a single T1 law firm has even attempted to solve this problem. There's a deep cultural rot in this system, and we can't look the other way. Obviously if you have people working these kinds of hours with a poor return on their life or a poor work life tradeoff you're going to have temper issues and toxic workplaces. Addressing that helps everyone. I'm fairly senior in the system myself and I understand the need to protect our revenues, but surely we can at least attempt to increase the efficiencies? Even a 20% reduction in the total number of hours spent means the poor A0 can at least work out, or spend time with a loved one, or develop an actual hobby. But oh no, we don't do that here.
Then there's the argument of oh even foreign law firms and investment banks etc are like this. Which was what was Ganit's original point, in those other places what makes it somewhat worth it is how much of that trickles down.
Too bad there aren't any vehement denials
On 3A: Fixed fee work as a proportion of total work can be as high as 50-60%. Add to these Re.1 PSU mandates. Add to this special discounted volume based INR rates for high churn clients.
On 3B: In a full service law firm model, practices will always have to cross-subsidize. This downside is compensated by topline growth, cross selling and opportunistic acquisition of smaller practices. At a median of 100-110 partners for biggest Tier 1 firms in India, there is still room for further consolidation in the Indian market.
On 4: Yes, I mean to suggest that A0s are spending a whole bunch of time that they don't at all enter into their timesheets. Sometimes partners push associates to do this. Otherwise, time gets written off. Your calculations trace back to hours weekly required for an associate to work. That assumes everything is billed and zero write off.
On 5: Look around you. A lot of more hardworking, sincere and better talent is in litigation or abroad. Shitty work life tradeoffs, inflated hours, and poor growth prospects - all 3 things true for law firms. No disagreement here. But why do you assume promoters who run this are trying to solve this? In the absence of competition from foreign firms, there's no [immediate] need to solve these. They are not worried about good talent not coming in as the work frankly is not rocket science.
On 6: You love making assumptions. No, it doesn't average out to 72 billed hours / week. You have assumed 50 weeks of work a year. That amounts to 3600 hours. For context, top US firms are very happy if associates to bill 2400 hours. MC firms are very happy if associates bill 2000 hours. Indian firms are quite content with 1500 hours. I have never billed more than 1200 "billable" hours in a year and I always got a bonus - sometimes good, sometimes average.
Please reflect before simply countering these points.
In my opinion the average A0/A1/A2 is the most profitable to a law firm. The revenue they bring in will ALWAYS be at least equal to or higher than what they would cost to the firm. I mean you will have to be HIGHLY incompetent before the firm to looses money on you (i.e., you get paid more than the amount the firm charges for the work you have done). Let me show you how:
I was a newly promoted A1 when, after discounting my hours, a client was billed ~16 lakhs just for my time. The entire bill, including the bill raised for my time, was paid in full (and no please don't start making any assumptions that the partner would've reduced their hours or some other reason which would have justified my time spent on the matter). So, close to 85% of my salary for the year was recovered from just one client! The time period during which I worked on this matter was from April to May (I obviously had other matters which I worked on during these months, so you can take a guess as to how much revenue an associate can bring in two months).
At the end of the year, I easily ended up billing > 90 lakhs for the firm (SIDE NOTE: At the end of the relevant FY, there was still 10-12 lakhs that was pending to be billed and the firm WOULD bill that eventually, but these delayed billings and the revenue earned from them are fucking lost in void and are not attributed to me only because it was billed after the end of the relevant FY!). Some pretentious asshole would still comment that 90 lakhs is less, but over and above billing that much amount I also did a lot of non-billable knowledge building work (essentially unpaid work for the firm).
Anyways my point being that, at the associate level, you can easily bring in around 1 CR (1.2 CR in case you are an A2/A3) in revenue for the firm and for which you get paid a maximum of 25-26 lakhs (at least that's what I know about A3 pay scales).
Okay so I think the maximum cost, that an associate would be to a firm, would be around 30 lakhs i.e., 25L salary + 5L (being whatever "overhead costs" the wannabe partners are crying about). Okay you know what since idk much about law firms operations costs, why not make the "overhead cost" to be 10L. So the maximum that an associate would cost to a firm is 35 lakhs compared to 1 CR of revenue that they can bring in easily!
Now tell me why are the wannabe partners crying about making 65 lakhs of profit on an associate? That's an insanely high profit margin (and you know what, why not make that 70 lakhs of profit, because lets add in the 3-4 lakhs of value that you help the firm save by doing all the unbillable work, which if the firm would have outsourced, it would have easily cost them that much).
So to any other associate who reads this, you are justified in whining about being underpaid, because as you can see from the numbers, its a literal sweat shop, and the numbers don't lie!
ok thx!
p.s I am an A0.
While I agree it is the partner who speaks/meets/advises the promoters, but at least in my experience, what my partners expect from me is TO ADVISE THEM with all the actions that can be taken and they would then decide/finalize what to do.
"I can get my steno of 30 years to do the same thing that the associate does and he/she will do it far better." - Lol then do that. "Correspondent" to the amount that you will pay an associate vs what you will pay to the steno, you will be more richer.
"never try and assume the genius and success of your senior as your own." - the same thing applies to you. Let me rephrase it for you - never try and assume the genius and success of your Firm's Brand Name as your own.