Professional services
Law Practice Payroll Cost Calculator
Works practice payroll, where the figure that matters is cost per billable hour.
Result
Whether partners take a draw or a salary changes the burden calculation materially, and it is the input people get wrong. A draw is a distribution of profit and carries no employer payroll taxes; a salary does, and in some entity structures a reasonable salary is required rather than optional. Which applies depends on how the practice is organised and is a question for your accountant rather than a preference. The share of revenue is the number worth watching, because payroll plus occupancy plus everything else has to fit inside revenue, and a practice where payroll alone consumes most of it has no room for the rent it is already paying.
Get a Free Business AuditHow the calculation works
Headcount times salary times the burden for payroll taxes, insurance, benefits and paid time, giving monthly and annual cost. Dividing timekeeper cost by their realistic billable hours gives cost per billable hour, which is the figure that rates have to clear and the one most practices never calculate.
What moves the number
- Burden rate on top of salaries.
- Realistic billable hours, which set the denominator.
- Mix of timekeepers and support staff.
- Overtime exposure in support roles.
Where this one goes wrong
Cost per billable hour is often startling the first time it is calculated, because the burden and the non-billable share compound: a salary divided by theoretical hours looks comfortable and the same salary burdened and divided by realistic billable hours looks very different. That second figure is the floor a rate has to clear before overhead and profit. Support staff overtime is the compliance item, since exemption depends on duties and salary tests rather than on the role being salaried.
Before you quote
- Calculate cost per realistic billable hour, not per scheduled hour.
- Apply the full burden, not just payroll taxes.
- Verify overtime exemption by the actual tests.
Where the rules come from
Questions
About this calculator
What is cost per billable hour?
Burdened timekeeper cost divided by the hours they will realistically bill. It is the floor a rate must clear before overhead and profit, and the first calculation usually surprises people because the burden and the non-billable share compound.
What does the burden include?
Payroll taxes, unemployment insurance, workers compensation, benefits, paid time off and training. It is a substantial addition to salary, and estimating or pricing from the salary alone understates the cost of every person in the practice.
Can salaried support staff be exempt from overtime?
Only if they meet the duties and salary tests, which many legal support roles do not. Being salaried is not itself an exemption, and this is a frequent source of misclassification. Checking against the tests is cheaper than an audit finding it.
The formula
payroll = partner compensation + salaries + bonus + burden on the employed portion; share = payroll / revenue
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How to use this calculator
- Partners or principals. Enter your own figure; the page starts at 2.
- Partner compensation each ($). Enter your own figure; the page starts at $210,000.
- Partners are. Enter your own figure; the page starts at Taking a draw, so no employment burden.
- Associates. Enter your own figure; the page starts at 3.
- Associate salary each ($). Enter your own figure; the page starts at $95,000.
- Support staff. Enter your own figure; the page starts at 5.
The result updates as you type, so you can try a figure, see what it does to total payroll cost, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Partners or principals | 2 |
| Partner compensation each | $210,000 |
| Partners are | Taking a draw, so no employment burden |
| Associates | 3 |
| Associate salary each | $95,000 |
| Support staff | 5 |
| Support salary each | $52,000 |
| Employment burden | 28% |
| Bonus as a share of salaries | 8% |
| Annual revenue | $1,850,000 |
What comes out
| Result | Value |
|---|---|
| Total payroll cost main result | $1,173,408 |
| Payroll as a share of revenue | 63.4% |
| Employment burden | $164,808 |
| Bonus pool | $43,600 |
| Payroll cost per fee earner | $234,682 |
| Payroll excluding partners | $753,408 |
| Revenue per fee earner | $370,000 |
| Revenue left after payroll | $676,592 |
Payroll costs $1,173,408, which is 63.4% of revenue, leaving $676,592 for everything else. Revenue per fee earner is $370,000 against $234,682 of payroll cost each.
How sensitive the answer is
Holding everything else steady and changing only partner compensation each, this is what happens to total payroll cost. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Partner compensation each ($) | Total payroll cost |
|---|---|
| $105,000 | $963,408 |
| $157,500 | $1,068,408 |
| $210,000 example above | $1,173,408 |
| $315,000 | $1,383,408 |
| $420,000 | $1,593,408 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Partners or principals
- A number, between 0 and 200, starting at 2.
- Partner compensation each ($)
- A money amount, between 0 and 5000000, starting at $210,000.
- Partners are
- Choose from Taking a draw, so no employment burden, On salary, so burden applies.
- Associates
- A number, between 0 and 500, starting at 3.
- Associate salary each ($)
- A money amount, between 0 and 2000000, starting at $95,000.
- Support staff
- A number, between 0 and 500, starting at 5.
- Support salary each ($)
- A money amount, between 0 and 500000, starting at $52,000.
- Employment burden (%)
- A percentage, between 0 and 80, starting at 28%.
- Bonus as a share of salaries (%)
- A percentage, between 0 and 100, starting at 8%.
- Annual revenue ($)
- A money amount, between 0 and 500000000, starting at $1,850,000.
What the results tell you
| Result | What it is |
|---|---|
| Total payroll cost | The headline result. A money figure. |
| Payroll as a share of revenue | A percentage. |
| Employment burden | A money figure. |
| Bonus pool | A money figure. |
| Payroll cost per fee earner | A money figure. |
| Payroll excluding partners | A money figure. |
| Revenue per fee earner | A money figure. |
| Revenue left after payroll | A money figure. |
Keep going
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