Big 4 Partner Compensation – How high is it, really?
The pinnacle of the public accounting profession is making it to partner, mainly because of the allure of the Big 4 partner salary; a lavish compensation package designed to make years of grinding for the firm worthwhile. However, for most professionals in public accounting, the rank of partner seems unattainable due to the pyramid-like structure of the firm, the limited spots available each year, and the immense time investment required to get there. Even if you can endure years of long hours and stress to make it, there’s still more barriers like being nominated, accepted, and affording the initial buy-in price. For every one of the wild stories you hear about partners making $10MM per year, you’ll hear another who says their cousin is a partner and barely scrapes together $200k. So, how much do Big 4 partners make and how can you tell who’s making what? Below, we answer many of the common questions that people have about Big 4 partner compensation, including the average salaries across firms and lines of service.
How much is the Big 4 partner buy-in?
When someone becomes a partner, they are no longer a traditional employee of the firm, but instead a part owner in the partnership of the firm. That doesn’t happy like a typical promotion – it comes with a serious capital investment. Just like salary and total compensation varies based on the line of service, location, and industry, the buy-in for partnership can differ depending on the partner’s role, area, and how much business they oversee. Recent partners have reported buy-ins averaging between $150k at the low-end, to upwards of $750k in high-end groups. There are a few reasons that this is so expensive, the most obvious is that it creates a barrier to exit for the newly promoted partners to ensure they stay with the firm. Of course, many newly minted partners don’t have that kind of capital sitting in the bank, so the firms help with that buy-in by taking it out of the yearly pay of the employee.
What are the levels of partnership structure?
The partners that you’re most commonly familiar with are typical partners who manage specific clients in their offices. There are still other partners with different roles and income streams that focus on “firm-level” operations. Partners often refer to buying-in as “being back at the bottom” because there as an entirely new hierarchy to climb once you’re a part owner, especially if you want to get moved into one of these firm-level roles. Some of the most common promotions are “Office Managing Partner” (OMP), PCAOB reviewing partners, or promotions that focus on the oversight of a specialized type of accounting or a few specific states.
How are Big 4 partners salaries determined?
It’s important to understand how owning a part of the firm can change the partner compensation. Rather than a strict and absolute salary, partners get a share of the profits that the firm generates throughout the year. If the partner is a standard partner handling client accounts, the engagements that they work on drive most of their profits. For audit, most publicly traded companies are going to offer higher fees and profit margins than smaller companies. For tax partners, salaries will depend on what clients that partner has personally sourced and closed. If a tax partner brings in a large group of smaller company returns, it could result in higher compensation than just a few corporate returns.
Which line of service makes the most?
If you’re comparing the separate lines of service, no matter what location you are in, advisory partners are going to bring home the most money because of the nature of the service. Advisory practices are specialty practices that have service lines dealing with technical issues such as implementing ERP systems, planning expansions into new markets, buying and selling companies, and even performing initial public offerings to the market. All of these are expensive, niche services that are extremely profitable and have driven a ton of growth in the past ten years. Additionally, hot-shots climbing the ladder in advisory don’t necessarily have to stay with the Big 4 to make serious money. Most middle-market companies use smaller boutique consulting firms that specialize in a specific service they are after and can make more than Big 4 advisory partners.
Do Big four partners get pensions?
One often overlooked aspect of the partnership is the pension which may be one of the best benefits. Most partners receive something along the lines of 25-30% of the average of their three highest years of earnings – for life. It’s safe to say that they aren’t worried about retirement.
Audit and Tax Partner Compensation
So, how much do these partners really make? Of course, as we’ve explained, it can vary, but we’re going to give you some hard numbers below. The average across all partners will land right around $650k – $850k each year. Big 4 Firms – PwC, KPMG, EY, and Deloitte Partner Salaries:
- Years 1-5: $300k – $500k
- Years 6-10: $400k – $1.3M
- Years 10+: $600k – $3M
Small Firm (10-50 people): $140k – 150k
National Firm: $200k – $800k