Big 4 Partner Compensation – How high is it, really?

by | Mar 14, 2018 | Career, Compensation | 8 comments

big-4-partner-compensationThe pinnacle of the public accounting profession is making it to Partner, mainly because of the allure of a Big 4 partner salary; a lavish compensation package designed to make years of grinding worthwhile.

However, for most people in public accounting, this is something that is 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 yet another barrier to entry in the initial buy-in price.

You’ve heard wild stories in the past of partners making $10MM per year and devil’s advocates saying their cousin is a partner and only makes $200k.

So where is it actually and how can you tell who’s making what?

Bellow, we detail commonly questions aspects about Big 4 partner compensation.

1. How much is the Big 4 partner “buy-in?”

When someone becomes a partner, they are no longer an employee of the firm, but instead a part owner in the partnership of the firm. This doesn’t just come as a promotion; it requires a serious capital investment.

Much like how salary and total compensation varies based on line of service, location, and industry, the buy-in can vary based on the firm and the part of the business they oversee. Recent partners have reported buy-ins averaging between $150k at the lower-end of average to $550k in higher-end groups.

2. Partnership structure has different levels

Outside of regular partners who manage specific clients in their offices, there are other partners with different roles and income streams that might focus on more “firm-level” operations.

You may hear about partner titles like “Office Managing Partner (OMP)” or PCAOB reviewing partners, partners in specialized accounting roles, or regional partners focusing on a state or two.

Sometimes, partners refer to buying in as being “back at the bottom” because there is a new hierarchical ladder to climb once you’ve become a part-owner.

3. The bigger the client, the bigger the fees

If the partner is a normal partner and handles client accounts, the engagements they work on drive most of their profits. For audit, most publicly traded companies will have higher fees and profit margins than smaller private companies.

For tax, it can depend on what clients the partner has sourced and closed. If a tax partner can bring in a large slew of smaller returns, it could result in a higher compensation than a few corporate returns.

4. Advisory trumps all

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 offering onto the market. These are all expensive, niche services that are extremely profitable and have driven a ton of growth in the past 10 years.

Additionally, they don’t necessarily have to stay with the Big 4 to make serious money. Most middle-market companies go to smaller boutique consulting firms that specialize in a specific service they are after and can make more than Big 4 advisory partners

5. Partners get pensions

One often overlooked aspect of the partnership is the pensions that partners receive upon leaving the firm. Most partners will receive something similar to 25% to 30% of the average of their three highest years of earnings for life. That’s some serious retirement money for the future.

 

Access the Compensation Dashboard

What does the dashboard answer?

  • What did Associates, Seniors, Managers, and Directors really make in 2017?
  • Which Big 4 firm pays best?
  • Where do new Associates make the most?
  • Which line of service gets paid best?
  • Does location affect salary?

Audit/Tax Partner Compensation

Big 4 Firms – PwC, KPMG, EY, and Deloitte Partner Salary

(Years : Low-Max)

  • 1-5 years: $300-$500
  • 5-10 years: $400-$1.3M
  • 10+ years: $600-$3M

Small firm: (10-50 people): $140-$450
National Firm: $200-$800k

Advisory Partner Compensation

Local CPA firm: $200-$500
Big 4: $350-$5M
Boutique Advisory: $300-10M+

Do you have any comments or want to provide more data points for how much they’re bring in? Leave a comment below