Lawyer Compensation Trends and Factors Affecting Pay
Firms are struggling to meet increasing associate compensation increases amid strong legal service demand and tight labor markets, but investing in long-term retention tactics can be key in meeting this challenge.
On the surface, lawyer salaries appear attractive. Yet an interesting trend has emerged: peaking for Big Law associates while prosecutors, small town lawyers and nonprofit attorneys enjoy much lower paychecks.
Base Salary
No matter the temptation, salary estimates of lawyers vary significantly across both public and private sectors. A recent survey from New York University law school graduates who joined firms earned a median annual salary of $190,000. Meanwhile, those taking on judicial clerkships or joining government agencies saw much lower annual average salary averages at $69,927 due to various factors like location, firm size and industry sector influences that can change an attorney’s pay such as location or sector specialization.
Firms need every tool available them in today’s competitive hiring market to attract and retain top-quality lawyers, in addition to salary increments and bonus structures. Training that enables attorneys to improve their performance and increase job efficiency may help retain top talent; for instance, training on litigation software, online document management systems or e-filing systems could make attorneys more productive and increase earning potential.
Outside of training, one of the best ways to reward and motivate attorneys is with bonuses linked to specific performance metrics. This incentive ensures attorneys have an incentive to perform, which in turn can reduce turnover rates and other costly consequences. Firms should also recognize recognizable qualitative achievements like chairing summer associate programs with rewards.
Supplemental compensation and benefits play an integral role in determining an attorney’s total compensation package. Signing, year-end and special bonuses often exceed six figures for top performing senior associates, while health insurance, retirement plans and flexible work arrangements all add significant value.
Bonuses
One of the key aspects that determine lawyer compensation is bonus payout. While an overall increase in attorney salaries is positive, assessing whether they’re receiving fair bonuses can be tricky for many attorneys. Luckily, there are resources available that can help assess whether someone may be underpaid; such as salary surveys, law firm compensation surveys and candid conversations with colleagues.
Under certain conditions and depending on their seniority and contribution to the firm, in-house counsel can expect significant bonus payments. A 2023 survey conducted by BarkerGilmore estimated an average in-house counsel salary was $249,000 with up to 40% bonus pay outs being possible depending on seniority level and contributions made.
Bonuses are an effective way for firms to recognize top performers. Unfortunately, their payouts may be linked to hard-to-measure performance metrics which are difficult to manage and measure accurately. Furthermore, the structure of a bonus system may impact retention negatively: rewarding senior attorneys over junior attorneys could create a hierarchy among performers which hinders teamwork or client service efforts.
Bonuses at law firms are frequently tied to revenue goals and may even depend on specific practice areas or offices, which can create a conflict of interest and leave certain attorneys feeling underpaid as they’re not performing to the same standard as others. To combat this conflict, companies should devise a strategy for rewarding top performers while still rewarding all attorneys for their contributions; such as using success factors recap, market factors and strategic considerations when devising this approach will ensure their top-rated attorneys receive appropriate compensation.
Benefits
Legal professionals continue to benefit from rising salaries and bonuses in their profession. Furthermore, in-house counsel are seeing improvements to their benefits package.
Compensation is one of the key aspects in attracting and retaining talent, and thus it is vital that businesses have an organized process in place for measuring attorney performance and determining compensation. Such an assessment must take into account firm goals as well as market analysis; and be repeated regularly to ensure attorneys are being properly compensated.
Measuring a lawyer’s performance typically involves reviewing their work-product and client service metrics. Some firms also utilize peer review systems for this evaluation process, which often can be done remotely to make participation easier for busy lawyers.
Certain firms incentivize their attorneys in ways that are detrimental to both their own happiness and client satisfaction. Traditional compensation models reward attorneys primarily for bringing in business and billing hours – not much else is rewarded; often forcing attorneys to prioritize financial gain over health or family considerations, creating an unappealing work environment and poor client experiences.
Recruitment is an ongoing challenge for in-house counsel and hiring firms alike, particularly with regard to finding top talent. This challenge stems from tight candidate markets, the growing importance of legal departments and functions, as well as an increasingly competitive compensation landscape. To stay competitive in this race for talent, offers of generous salary and benefit packages aligned with market realities should be used; additionally it is crucial that cultures meet candidates’ non-monetary needs as part of recruitment strategies.
Flexibility
Recent years have seen an increasing number of law firms and legal departments adopt flexible work arrangements for employees. This enables employees to balance work life with personal life more easily, including remote working arrangements, job sharing arrangements and part-time schedules. Thus, flexibility has become an integral component of lawyer compensation packages.
Legal industry research revealed that the ability to work flexibly was the single most crucial factor affecting job satisfaction among lawyers, overtaking even pay as the primary measure. Unfortunately, however, some attorneys may struggle with striking an equitable work-life balance under such conditions.
An attorney firm’s ability to accommodate flexible hours will depend on both its culture and workforce requirements; for example, those that prioritize client service might be more willing to offer flexibility than ones focused on billable hours.
Flexible work options can also help to decrease employee turnover and attract top talent, as well as giving junior attorneys an opportunity to gain experience in new legal roles.
Firms must ensure their lawyers are adequately compensated for their services. Although hard caps on attorney compensation may be necessary in certain instances, it must not deprive attorneys of rewards they deserve for performing at such high levels; otherwise performance could suffer significantly.
Law firms should establish and clearly communicate a compensation philosophy and how they will evaluate attorney success, so as to recognize team members for contributing towards fulfilling the firm’s mission and values; doing so also will reduce instances where attorneys are awarded solely on the basis of client acquisition or billable hours billed.
Performance
Performance-based lawyer compensation is a key component in attracting and retaining talent, so law firms must carefully define criteria for advancement, use objective data when making salary increases decisions, and minimize drama when it comes to making compensation decisions. By doing this, firm leaders will know they are rewarding those who bring value to the firm.
Many firms rely on intricate formulas to determine lawyer compensation. These may include client and matter origination credits, hours billed, non-billable firm activity metrics and other systems; however, these systems often lead to confusion regarding an attorney’s economic contribution, and can encourage competition between attorneys rather than working together towards satisfying clients.
Law firm compensation models that place too much emphasis on individual achievement can create toxic work environments and damage their firm’s reputation. For instance, rainmaker attorneys might prioritize winning new clients over serving existing ones to meet their financial goals, leading existing clients to be unhappy and leading to high turnover within the firm.
An effective strategy to assess if you are underpaid involves comparing your current compensation with industry averages, using resources like the National Association for Law Placement (NALP) or legal industry publications that provide extensive salary data on various roles and practice areas.
In 2022, median total compensation for managing and senior counsel rose by 1%; however, median sign-on bonuses were down 8%. Public tech, industrial and energy companies tend to offer the highest levels of total compensation while portfolio companies provide long-term incentive compensation as an added perk for general counsels.
