Setting the Base Salary: What's a Partner's "Street Value"?

Source: The Marc Rosenberg Blog

The following includes excerpts, reproduced with permission, from a blog entry by Marc Rosenberg.

Base salary represents a partner's street value to the firm, what he or she would be paid to join another firm. In setting the base, firms look at each partner's origination and client billing responsibility, relationships with clients, leadership, role in the firm, and expertise. For most firms, the base is 60 to 90 percent of total compensation. The bonus is reserved for “what have you done for us lately?”

What do other firms use as a base salary? Unfortunately, there's no definitive answer because it depends how much money a firm earns. First, here's what they don't do. They don't set the bases equally. They don't keep the ratio of each partner's base to the others the same, year after year. They don't guarantee that every partner's base goes up if the total base pool increases.

The most common approach is very similar to the method used to change the base salaries of staff: Determine the total size of the base salary pool for the coming year and compare it to the base salary pool for the recently completed year. If the overall increase is 5 percent, partners whose performance is evaluated as average can expect a raise in their base of close to 5 percent. Those with above average years can anticipate a raise of better than 5 percent and those who had “off years” might expect a small increase or perhaps none at all.

A firm may make an exception if, for example, it needs to “bump up” new partner salaries, one or more partners have hit “home runs,” or it has overpaid a partner.

For the complete post, read “CPA Partner Base Salary Guidelines.”

From The Marc Rosenberg Blog, January 9, 2013, http://blog.rosenbergassoc.com.