The short answer
An associate is paid a salary, but they cost more than their salary and bring in less than their standard rate. This tool adds the employer costs to the salary, turns your standard rate into the rate you actually collect after write-downs and unpaid bills, and shows the contribution to the firm, the break-even hours and the standard rate you would need.
Where to find the numbers
| Number | Where it comes from |
|---|---|
| Salary and benefits | From the employment agreement and payroll. Benefits as a percentage of salary: health plan, RRSP match and similar. |
| Other direct costs | Law Society fees, professional liability insurance, courses, research subscriptions, software seats and a share of the desk. From the income statement. |
| Standard rate | The hourly rate the firm sets for that lawyer. |
| Billing and collection realization | How much of the standard rate is kept after write-downs, and how much of what is billed is collected. See the Fee Realization tool. |
If this happens, then that
| If… | …then |
|---|---|
| Billable hours go up | Fees rise, but the associate’s costs mostly do not, so most of the extra goes to contribution. |
| More time is written off | The collected rate falls and break-even hours rise. Check where the write-offs come from. |
| The standard rate rises | Break-even hours fall if clients accept the rate and realization holds. |
| Salary rises | Cost rises and the break-even hours rise with it. |
This is a simple view of one lawyer. It does not include the firm’s shared overhead, bonuses, partner time spent supervising, or the value of work that is not billed. For owner pay see the Salary vs Dividend Calculator.
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This free tool is a courtesy of HJ Wu & Company Inc. (CPA), a Vancouver CPA firm offering accounting, tax, financial reporting and review assurance. Feedback on the calculators is welcome.