I understand that the way to figure out whether you’re paid appropriately is to take your number of billable hours multiplied by your hourly rate and divided by three. Going into my annual review, I’m it even sure if I’ll be offered a raise, but if I am, should I apply that formula to my new hourly rate (if it’s increased) or my current one?

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Unless you work in a lockstep situation, no. Law firms don’t employ formulas like that, despite all the rumors. It’s certainly an interesting data point, but a more reasonable approach would be revenue and value driven. I would look more closely at the revenue you collected (and whether you exceeded your revenue targets), then ballpark for the overhead attributable to you, and try to see what sort of margin there is over that. If you blew it out of the water, certainly command to be compensated for that. If you were short of your goal, perhaps tread lightly. Also, look at your non-billable contribution to things like marketing, training, origination, and make your best case for as large a portion of your “gravy” as you deem fit considering the objective and subjective factors described above.

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Yes and no. That’s mostly correct. I don’t know what info you have access to, but I have access to the amount of revenue my hours generated (assumption of 100% collected). My revenue isn’t billable hours x standard billable rate (consultations count towards billable hours but aren’t at my billable rate, and some cases are discounted rate.) So I’m counting my revenue / 3. (My billable hours x billable rate is $28,000 higher than what my system is telling me my revenue for the fiscal year is).

Also, you do understand that your hourly rate refers to how much the client is being charged/paying, not to how much you earn, right? This is only if you use your formula versus mine. For example: Average hourly rate of $175.00, 2,000 hour goal. $175/hr x 2,000 hours = $350,000 Your total comp would be around $117k (including bonus and benefits) under your calculation scenario if you collect your numbers. However, depending on how long you’ve been practicing, you may only collect 75% of what you enter as billable time, in which case your comp would look more like: $175 x 1,500 (actually paid by the client) = $262,500 Your total comp would be around $87,500 (including bonus and benefits) Again, I recommend looking at your revenue number as primary, because there’s a big swing depending on how much of your “billables” you actually realize.

Echo the fact that your billed hours cannot be presumed to be your collected revenue.

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