Analyzing Big 4 Partner SalariesThe Complete Guide
We get it, you want to join the Big 4 because you have dreams of making partner.
As career goals go, it’s not a bad one.
Yeah, the rewards are amazing…$300k in your first year. The potential to earn many millions more.
(It’s one reason why we’ve helped so many people get into the Big 4).
But is the Big 4 partner salary worth those years of work? Is the house in Beverly Hills attainable? In this guide we’ll discuss what a typical Big 4 partner salary really looks like.
A Big 4 Partner Salary…Isn’t a Salary
Before we dive into the detail, there are some specific things you need to know.
Partners do not earn a salary.
Yes, you read that right.
Wait, what?! So how do they get paid so much?
This is the great part…Partners actually own the Big 4.
That’s right, that PwC Partner you know…she actually owns PwC! (Granted it’s along with the other thousands of Partners, hence the title “partner”, but when firm revenues are in the billions their insane compensation starts to make sense).
Instead of a salary, Partners earn units, whose value relates to a share of the profitability of the firm for that year.
But because actual annual profits are only known at the end of each fiscal year (and because nobody wants Partners to starve…), they do receive a salary-like “advance” every month.
Buy-in Payments are Required
When new partners are promoted, they are expected to “buy-in” to the partnership.
And buy-in payments typically range from $250,000 to $1 million (although it can be as low as $50,000 in some cases).
That’s a lot of cash. What is this buy-in payment for?
The buy-in process covers some important factors which a typical employee isn’t concerned about, such as personal liability.
But essentially, the large buy-in payment is designed to make sure new partners do not leave the firm for a very long time.
The thing is, most new partners will not have millions sitting around in their checking account.
And so to make it even more difficult to leave, the firms helpfully offer an interest free loan to fund this buy-in payment.
The interest free loan is typically repayable over something like 10 years and so reduces the Big 4 Partner’s salary by approximately $25,000 to $100,000 a year.
Becoming a Partner is Just the Beginning
You’ve just passed your Big 4 interview and you thought that being made Partner would be the pinnacle of your Big 4 career, right?
Becoming a new partner is like starting your first day all over again. You are at the bottom of the pile and need to work your way up (granted you’re earning $300k/yr, but still).
There are 7 to 10 distinct partner levels within each of the Big 4, with promotion from each meaning more units.
Promotions happen in the same way as for typical Big 4 employees. You will need to work hard, bring in clients and run an effective business.
A typical partner might reach level 6 by retirement. The higher levels are reserved for the CEOs, Chairs, board members and other leaders.
It’s All About the Equity
You’ve heard about equity, right? It’s the love of entrepreneurs everywhere.
Partner’s units equal equity in the business, and their share of equity depends on a number of factors.
We mentioned “Partner level” above, but there are numerous other factors that go into determining how rich the Partner is going to get:
- Importance of their clients to the firm
- Fees earned per year
- Helping other employees become Partner
- Back office duties (such as talent leadership, risk, etc)
(Not to mention the monthly payments on the Lambo…).
This leads to some interesting scenarios. A super successful sales partner that does little else may earn the same as a board member because they bring in so much revenue. It also means that many partners earn more than their own boss (imagine that!).
The other big factor is service line.
Advisory/Consulting Partners typically earn the most because they are delivering the most value in the marketplace. With that being said, none of the service lines are skimping out when it comes to pay.
And It’s More Than Just the Money
Yes, money is important.
How else could Partners afford a Ferrari and their own Helicopter and a legit castle (true story, I actually know the Partner personally…).
But there are other factors that are often overlooked when it comes to making Partner at the Big 4.
Firstly, there’s the personal satisfaction of making it to that level. It’s fairly rare with only 2 to 3% of hires making it (though definitely not impossible, just look at the total number of new U.S. partners that PwC recently promoted).
Partners also get a lot of self worth from leading some of the largest and most successful client service organizations in the world. Not only that, they get to make a serious impact for companies of all sizes everyday.
Beyond that, Partners can expect unbelievable healthcare benefits and access to members-only clubs.
Oh and don’t forget the pension.
One of the main advantages to being Partner is the pension scheme. Partners can expect to receive around 25% of their best three year’s earning average.
That can equal hundreds of thousands of dollars a year, even millions in some cases.
Pretty awesome if you ask me.
So How Much Do Big 4 Partners Actually Make?
And now the part you’ve all been waiting for.
How much cash do Big 4 Partners make each year?
Let’s take the example of Jim Simmonds, a new partner in the New York international tax practice.
We can calculate his annual and lifetime earnings like this:
- Annual earnings for a new Big 4 Partner are approximately 6-7 times their Consultant salary. So let’s be generous and say Jim’s starting salary as a Partner is $420,000
- This is then reduced by the buy-in payment (let’s be ungenerous and charge him $100,000 per year)
- Jim will then go on to lead a large team and bring in average-sized client. He will also be in charge of innovation for his department. He will reach level 6 in the partner structure before he retires
Here’s a graphical representation of Jim’s career earnings:
See how it decreases some years where his practice or the firm as a whole didn’t reach its targets.
So yeah, in today’s money a typical partner can expect to earn over $11 million during their career.
Not bad, eh?
But as we said, these amounts can vary widely.
Some partners who stick to their business and don’t do much “back office” work could stagnate (in the loosest sense of the word…) at around $600,000.
On the other hand, board members and regional leaders will be well into the millions per year, up to $3 million plus for CEOs and Chairs.
In conclusion, Big 4 partner salaries can range from around $300,000 a year to $3 million plus, with the average being approximately $750,000, taking into account all new and existing partners.
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