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
Are these figures per hour?
I would say it’s in the unit of K
yes. they are making hundreds of thousands of dollars per hour. hahahahah
Partners are delusional. I can’t believe they actually *choose* to buy into such old an stagnant businesses that will be disrupted by smaller and more agile players in the market.
I would challenge that notion purely because if you want to independently audit a company, your business needs to be big enough that your independence can’t be easily compromised by the company you’re auditing.
The Big 4 firms to try to innovate, but not at the speed that smaller practices can – so while the businesses might be overtaken by start-ups at some point, you’ve got quite a while before you worry about that.
Also – as a Partner and co-owner of the firm, you’re in a position to start to start to drive changes and create your own innovations.
actually – those big 4 ranges are pretty accurate. Just keep in mind that the typical year 6 to retirement aged partner makes in the 600-800k range. You have to be something special to get to the high end of the range and its not common, especially outside the high cost of living areas.
I am a retired partner since age 56 and my earnings ranged from $105,000 my first year back in the mid 1980’s to $1.3 million the year I retired about 7-8 years ago. Average now considering all the new and experienced partners should be about $850-$900K. (just an estimate).
Hi GBA,
Did you enjoy being a partner? How much time was expected of you?
so an inflation-adjusted figure from your earnings in 1980 would be today a little more than $440,000. Not too bad for an unseasoned partner.
https://www.rba.gov.au/calculator/
I am a 13 year Big-4 partner and make $1,2 mill divided between salary and profit sharing. The average in tax is now a little over $1 mill.
I am a partner at PWC. I make 500k per year but had to buy in for 750k. The 750k is a 10 year loan that effectively reduces my salary by 100k per year. I work for 24×7 and have no time for family.
That math doesn’t add up. 750/10=75. 500-75=425.
HI Joe
Then why do you work as a partner. You can easily get 400K plus and a very good work life balance if you go inhouse
The Deloitte partner “pension” is unfunded, as are probably all of the rest of the big 4 firms. Ask the retired Arthur Andersen partners what happened to their “pension” when the firm went bankrupt.
I’m a new partner at a Big 4 in Japan. I make $400k equivalent per year. I make $20K monthly fixed, then $160K bonus guaranteed once a year. If we have a good year, then it goes up from there. I get retirement pension after 10 years of service.
This is excellent information. Thank you so much for sharing!
Sometimes a high achieving small firm partner can make much more than that. I have been a partner at a firm less than 100 people for 13 years. Average Annual Compensation: First 5 years: $800K; Second five years: $1.2 million; the past three years: $2.1 million.
Thanks so much for sharing! If you don’t mind, please let us know a couple of your firm achievements that led to your increased salary. I’d love to update the article with insight into how small firm partners can be as successful as you! Cheers!