Compensation Trends in the Legal industry: 2021 Edition

An updated look at what’s driving the salary expectations of today’s in-demand lawyers 

As the US economy recovers from its COVID-related downturn, job prospects in the legal industry are healthier than ever. 

Hiring professionals who serve law firms and corporate legal departments are facing the tightest job market ever. While organizations nationwide are experiencing hiring deficits from a job market that is steadily heating up, the legal sector is on fire.

We’re finding that to attract top talent, benchmarking compensation is merely a start. Hiring managers  must be prepared to offer more, including remarkably generous signing bonuses, special bonuses, and perks.

Here is an update on compensation trends for lawyers nationwide in 2021:

Breaking the $200k barrier

In June 2021, the international law firm Milbank began a new chapter in the “Biglaw Salary Wars” by offering associates the starting salary of $200,000, breaking the previous record they set in 2018 of $190,000. Davis Polk reraised to $202,500.  Other firms came over the top, setting the base salary for first year associates at $205,000. As of this writing, many Big Law firms have matched, setting the new prevailing market base salary for first year associates at $205,000.

Many firms are now handing out special bonuses — generally paid half in spring and half in fall — in addition to the traditional year-end bonuses. The market is so tight that we are seeing firms extending same-day offers to their hottest prospects and offering signing bonuses as high as $150,000 to mid-level associates and senior associates.

This type of offering follows a pattern for the nation's largest law firms, which even in less competitive hiring environments are known to offer their top-tier recruits large salary and bonuses packages. 

“Biglaw” firms, loosely defined as private US firms employing 500 lawyers or more, and smaller firms that mimic their pay structure or have a “substantial international presence” traditionally set their compensation levels according to the Cravath Scale. That’s a payment structure developed by Cravath, Swaine & Moore LLP, a firm long regarded as the “authority” on setting associate salaries. Cravath has since been eclipsed by Milbank, Davis Polk, and several others. 

The highest-paid legal specialties currently include corporate, private equity, and intellectual property (IP). Mergers & acquisitions (M&A) lawyers are the most in-demand and expensive, followed by IP litigators and privacy & cybersecurity attorneys. Entertainment and media and tax law attorneys are also commanding top dollars.  

What's going on in the country can also impact the demand for specific legal services. During the pandemic, the practice areas reporting the highest increases in growth were family law, consumer law, and insurance. Throughout 2020, the demand for bankruptcy lawyers surged.  With the economy on a rebound, the demand for bankruptcy attorneys is starting to wane.

In-House Law Departments are getting creative

In-house law departments are now faced with a double whammy.  Law firms are raising rates to cover the cost of increased associate salaries, and they are footing the bill.  AND associates are now being paid such a high base salary that it becomes difficult to attract talent from Big Law firms. The most competitive in-house law departments are adjusting their compensation packages and getting creative with bonuses and stock options.

Geography is no longer driving salaries

Even before the pandemic, law firms began paying their attorneys the same regardless of their location. Traditionally, lawyers practicing in big cities tended to make significantly more money, but those differences have been eroded by more recent salary-setting standards.

The move to remote work did not appear to have a direct short-term effect on lawyer compensation, but the “forced experimentation” with working out-of-office may make geography far less critical longer term. Those changes could affect relative compensation rates.

Firms and especially in-house legal departments that adjusted well to remote work during the pandemic may be amenable to limiting on-site requirements for job candidates. Similarly, top candidates may now demand on-site flexibility as part of their hiring package.

The right compensation, benefits, and perks for “superstar” candidates

Attracting candidates who fit an organization’s culture is never easy, and the recent economic and societal upheavals have made hiring increasingly complicated. 

It’s important to keep in mind that other factors beyond compensation trends also influence the hiring (and retention) situation. For example, Bloomberg Law’s 2021 Law Firm Benchmarks Survey shows that the top four law firm HR challenges include maintaining attorney well-being, retaining talent, overworked lawyers, and low office morale. 

In this most competitive hiring market for lawyers, firms and corporations looking to attract and sign quality hires should not only examine their compensation packages. They should act quickly to promote their willingness to offer big salaries and extensive perks, along with a culture that meets the non-monetary demands of top candidates. 

Avoid Burn-Out

While lawyers are enjoying the increased compensation, the number of lawyers reporting “burn-out” is rapidly increasing. In the end, lawyer happiness, self-care, and a supportive firm or company culture are critical to retaining top talent. 

Carrington Legal Search is celebrating 20 years in business: we were in the trenches with our clients during 9/11 and 2008. We partner with our clients to identify leaders and mission-critical talent to shore up and grow companies even during the most challenging times. We are here for you! To make our nationwide network work for you, get in touch at 512-627-7467 or email carrie@carringtonlegal.com.