Will Law Firms Increase Salaries in 2015?
Published: Oct 30, 2014
Earlier this month NALP released the results of its 2014 Associate Salary Survey which, to nobody’s surprise whatsoever, showed that BigLaw associate starting salaries are not going up anytime soon. In fact, associates starting at large firms in 2014 are less likely to be making $160,000 than associates in the class of 2013. The $160K amount represented only 27 percent of first-year salaries reported by large firms in 2014; whereas in 2009, two-thirds of first-year salaries were at that level. Further, entry level salaries have remained flat, with no sign of an increase.
This information is squarely at odds with a sentiment that many associates expressed when they took Vault’s law survey earlier this year. Associates at all levels think it’s high time for the market rate to go up. Talk about not being in a powerful bargaining position.
Associates are particularly irate about flat compensation at firms that have boasted record profits. Who can blame them? Here's what they shared with us:
- “The fact that base salary hasn't changed since 2007 is frustrating given inflation and the current health of the industry. Stagnant bonuses are equally as frustrating particularly given the record profits firms enjoyed across the industry this year.”
- “Although we are very well paid, our bonuses have never been brought back to the levels they were at pre-economic turndown (despite the fact that the firm is more profitable than ever).”
- “There are no financial incentives to work harder here. Partners make ridiculous profits and associates do not share in any of the bounty.”
- “Hard to say that I'm being cheated at $300K/year, but no doubt this will be another record-breaking year for the profits per partner, and we haven't seen associate salaries or bonuses increase since 2007.”
- “Our bonuses are s**t compared to what they were. Our salary is low compared to what it was in 2007. Firms need to update.”
And don’t even mention the C-word….
- “The firm pays the Cravath scale (currently $160,000 for first-year associates). It's a lot of money, and it feels nice to be compensated for the level of work that is expected of us. But given the economy has more than recovered since 2008, that base salaries have not gone up in seven years is depressing.”
- “While our base salary is nice, it really doesn't break down to that much money per hour. Additionally, the firm saw its most profitable year ever last year and yet bonuses were the negligible Cravath scale. If profits are what they were pre-2008 then bonuses should be the same way—especially because associate classes are much smaller now than they were then.”
- “Salary and bonus is Cravath scale, standard for top New York firms. You can understand why they don't want to leave the pack (i.e. avoid creating a race to the top and higher salaries). However, when performance is good (like in 2013) you get disappointed when bonuses are in line with Cravath instead of reflecting the firm's financial results.”
- “We get paid market and market bonuses but I strongly believe it's time for Cravath to up the market. Everyone can afford to pay more in bonuses. Most firms, including mine, are doing well enough that they can afford to give out better bonuses like they did before.”
Student debt is another major stressor, as paying back loans in lump sums with high bonuses is a thing of the past:
- “Given the amount of time we spend working, the fact that PPP is higher than ever, the fact that law school wages have gone up since the great recession, one would expect a greater reward. I don't think partners, who likely paid off their student loans after two or three bonuses, understand how long associates today will take to pay off student loans.”
- “It is time for a raise. Law school tuition has skyrocketed since the move to 160,000 and I'm pushing 300,000K in debt paying for both undergrad and law school. The days of the big bonuses helping you pay off your student loans are over, and billing over 200 hours per month has me feeling like even the coveted 160k is not commensurate with my work or sufficient to justify the cost of a legal education.”
But not all associates making the market rate are discontent with their compensation:
- “I make more than my parents who have been working for 30 years and I have virtually no experience in my field. It's pretty generous all things considered.”
- “I am very generously compensated. Quite frankly, any associate at my level complaining about their compensation requires a reality check on the lifestyle that most people, America and abroad, live.”
Until further notice, firm management and associates will remain at a standstill, according to NALP’s data. While $160K still remains the most commonly reported salary for the largest firms in the largest markets (Chicago, DC, LA, NYC), it is less widespread than in previous years. The median large firm starting salary for 2014 dropped to $130,000, compared with $147,500 in 2013. (NALP clarified that the smaller percentage of top-end salaries does not mean that firms are reducing first-year salaries; rather, the makeup of the large firm category is changing. There are more firms of the 700+ size that are comprised of smaller regional offices that are less likely to pay $160K and may pay more like $145 or $135Kt to new attorneys.)
Firms have no incentive to increase the market rate (though some firms, such as Wachtell, Boies Schiller, Williams & Connolly and Cahill—all topping the list of Vault’s Best Law Firms for Compensation—are well-known for beating the market either through base salaries, bonuses or both). They are still offering the highest salary law school graduates can hope for. The good news is that expectations are changing (hence the declining law school application rate), so perhaps in future years there will be less grumbling about compensation, as no law graduate with mountains of student debt can rely on their future pay as a sure way to nix their loans in a few short years.
Follow us on Twitter @VaultLaw