Bender: You guys realize you live in a sewer, right?
Dwayne: Perhaps, but perhaps your civilization is merely the sewer of an even greater society above you!
Leela: No. We're on the top.
Fry: Daylight and everything.
By now if you follow legal employment news you've heard about the full time attorney job in Boston offering just $10,000 annual pay (plus benefits). The job description claims that "Compensation is mainly based on percentage of work billed and collected," and that got this robot thinking, just how much is this associate being billed out for?
The traditional law firm model has been 1/3 of revenues go to associate compensation, 1/3 to overhead, and 1/3 to partner profits. So, if we can figure out total compensation, we ought to be able to figure out the total billable hour rate.
$10,000 is pretty easy to figure out, that's $10,000. The tricky part is the benefits. The job comes with health insurance, malpractice insurance, a clothing allowance, and an MBTA bus pass.
If we assume a middle of the road insurance plan, that's about $200 a month, $2400 a year.
A clothing allowance for an attorney only making $10,000 should be about $150 spent at Men's Warehouse. But, let's be a bit more generous and assume this is going to be a cool $1000. That's a couple decent suits, a pair of shoes, and some shirts and ties.
The bus pass is $59 a month, $708 a year.
As for the malpractice insurance, since you're working full time this isn't really a "benefit." It's not like they're covering your insurance so you can then take other clients on the side, which would have been the case if this were only part-time work. Instead, malpractice insurance properly falls under the firm's overhead, so I'm not putting it in compensation.
This brings us to a total of $14,108 total compensation.
Under the tradition model where compensation is 1/3 of total revenues, the associate would be bringing in $42,324 a year. Now to figure out the billable hour rate.
The standard number for hours billed in a year is 2000. But given the low salary and the fact that compensation is based not on billing but on collections, we're going to go with a much smaller number, 1200 hours.
$35.27 an hour.
That's not the pay rate, that's the billable rate.
Of course, that's probably not the billable rate, not for a law firm in Boston. It's unlikely the associate would be billed out at anything less than $50 an hour, though something like $75 is more plausible.
The 1200 hour mark is also extremely low. This is a full time position after all, and if the firm is smart enough to get retainers from their clients they'll have a decent collection rate. If you're billing 1800 hours and collecting 80% of the time, that's 1440 hours a year.
1440 hours a year at $50 an hour is $72,000.
Associate compensation just dropped to a sad 19.6%.
1440 hours a year at $75 an hour is $108,000, at which point associate compensation is a mere 13.1%.
Fry: That's the last time I visit a planet called Cannibalon.
Bender: Yeah. Food was good, though.