Tag Archives: talent acquisition

Associate Market, Associate Tips, Featured, homepage, Market News, Tips

The Rising Wave of Associate Salaries: Analyzing the Impact on the Legal Industry in 2023

An insightful recent examination of associate remuneration has unveiled a striking surge in first-year associate pay packets since 2021. As of the onset of 2023, the median base salary for a first-year associate touched the landmark of $200,000, a noteworthy escalation of $35,000 (+21.2%) from 2021. The figures also underscore the diverse effects of these raises across various firm sizes, geographical regions, and legal markets. This swell in associate remuneration carries wide-ranging ramifications for the legal industry, encompassing issues related to talent retention and acquisition, fiscal strains on smaller firms, and potential changes in client billing rates.

Escalating Salaries Across the Spectrum

The 2023 Associate Salary Survey has indicated a rise in first-year salaries across all firm sizes since 2021. Intriguingly, smaller firms, housing 100 or fewer lawyers, recorded the steepest growth in median first-year salaries, showing a 29.2% increase from $120,000 in 2021 to $155,000 in 2023. This trend suggests that even compact firms are feeling the heat to augment salaries to remain competitive in the race for legal talent.

Firms employing between 251-500 lawyers saw their median first-year salaries climb by 21.9%, from $160,000 in 2021 to $195,000 in 2023. Likewise, firms housing 701-1,000 lawyers witnessed a 20.6% increment, with median first-year salaries growing from $170,000 in 2021 to $205,000 in 2023.

The most substantial dollar rise was observed in firms with 501-700 lawyers, with median first-year salaries soaring from $155,000 in 2021 to $200,000 in 2023 (+$45,000), a 29.0% augmentation. This data points out that mid-sized firms are also making noteworthy adjustments to their salary structures to keep pace with the dynamic legal market.

In the case of the most sizable firms, those hosting more than 1,000 lawyers, the median first-year salary touched $215,000 in 2023, a 23.3% rise from $174,000 in 2021. While these firms were the sole entities to report such elevated median salaries, their sway over the rest of the market is substantial, as they account for 75.0% of all first-year salaries in this firm size category.

Overall, the salary augmentations in large firms, paired with rising inflation, have exerted pressure on smaller and mid-sized firms to amplify their salaries as well. This pattern illustrates the extensive effect of the “talent wars” and the market’s reaction to the escalating demand for proficient legal professionals.

Geographical Influence on Salaries

Geography continues to significantly influence salary variations across regions, cities, and states. The 2023 Associate Salary Survey provides analyses for 26 individual cities and additional states and regions, revealing a wide spectrum of law firm compensation. Median first-year salaries by city oscillate between $145,000 and $215,000.

Eleven cities now boast a median starting salary of $215,000: Austin, Boston, Chicago, Dallas, Houston, Los Angeles/Orange County, New York City, San Diego, San Francisco, Silicon Valley, and the Washington, DC area. These cities are spread across different regions, reflecting the flourishing legal markets in these areas.

In locations outside of the 26 major cities featured in the report, the $215,000 starting salaries are found less frequently. The highest median first-year associate base salary in these smaller U.S. cities and towns was in the Northeast ($170,000), trailed by the Midwest and West, both at $165,000. The South reported the lowest salaries, with a median first-year salary of $135,000. This regional disparity underscores the necessity of considering local market dynamics when setting salaries.

Moreover, the most commonly reported first-year associate base salary across all firm sizes was $215,000, accounting for 42.7% of all salaries. This further underlines the influence of major legal markets and large firms on salary trends throughout the industry.

The Ripple Effect on Summer Associates

The escalation in associate salaries also cast a significant impact on second-year summer associates. Their median weekly salary witnessed a robust growth of 13.4%, elevating from $3,075 in 2021 to $3,550 in 2023. This indicates that law firms are revising their compensation packages not only for full-time associates but also for summer associates to maintain a competitive edge in the legal talent market.

Furthermore, the rise in summer associate salaries could potentially sway law students’ decisions when choosing firms for their summer internships. Consequently, firms offering higher summer associate salaries may attract more high-achieving law students, further fueling the competition among law firms.

Beyond salary adjustments, some firms may also enhance the overall summer associate experience by offering unique professional development opportunities, networking events, and mentorship programs. These non-monetary benefits could serve as differentiating factors for firms in the eyes of law students, helping them attract and retain top talent amidst rising salary expectations.

Rippling Effects on the Legal Industry

Talent Retention and Acquisition: The rapid salary increases reflect the fierce competition for legal talent. Law firms must continue to offer competitive compensation packages to attract and retain the best talent.

Financial Strain on Smaller Firms: The salary increases in large firms and rising inflation have created financial pressure on smaller firms to boost their salaries. Smaller firms may need to explore alternative strategies, such as offering non-monetary benefits, to stay competitive in the talent market.

Regional Disparities: The geographical influence on salaries underscores the need for firms to consider regional cost of living and market factors when determining their compensation packages.

Impact on Clients and Legal Services: The increased salaries may lead to higher billing rates, which could affect the affordability of legal services for clients. Law firms may need to look for ways to improve efficiency and reduce costs to maintain client relationships.

The notable increase in associate salaries since 2021 underscores the fierce competition for legal talent and emphasizes the need for law firms to adapt swiftly. As the legal industry continues to evolve, firms must meticulously consider their compensation strategies and maintain flexibility to attract and retain top-notch professionals. If you’re seeking a more personalized understanding of these industry shifts and how they can potentially impact your legal career trajectory, connect with a Lateral Link industry expert. We are poised to provide you with tailored advice and guidance, helping you navigate your career in this ever-changing landscape and ensure you secure exactly what you’re looking for in your legal career.

Associate Market, Featured, Market News, Partner Market

Navigating Attorney Lateral Moves: Key Trends Shaping Today’s Legal Landscape

The legal landscape is continuously evolving, and Lateral Link’s extensive research into the trends and shifts in the United States’ legal market offers valuable insights. As we explore these findings, we’ll discuss the implications for both law firms and individual attorneys while highlighting specific firms that have been active in the lateral market.

Talent Wars: The Surge in Partner Hires

Between 2021, and the end of 2022, Am Law 200 firms made waves by hiring over 3,600 new partners. These talent wars at the partner and associate levels were the talk of 2022, but the origin of these new partners captured even more interest. For example, Latham & Watkins, and Kirkland & Ellis have been particularly active in recruiting lateral hires, reflecting a broader trend of expansion and increased competition for top talent. Across the Am Law 200, nearly 30% of all partner additions came from unranked firms, while just 12% came from Am Law’s Second Hundred firms.

Interestingly, Tier 1 Am Law firms (firms ranked 1-50 in the 2022 Am Law 200) primarily sourced new partner hires from Am Law 100 firms (59%). For instance, Paul Weiss and Skadden have strengthened their presence in the New York market, while Cooley and Morrison & Foerster have been active in expanding their teams in California. These top-tier firms added more new partners from unranked firms (11%) than from Am Law Second Hundred firms (9%).

Geographical Insights and Gender Dynamics

New York, Washington, D.C., and London remained the most active markets for partner hires. However, the percentage of Am Law 200 partner hires in emerging legal hubs such as Salt Lake City, Nashville, and Austin exceeded 10% of all Am Law 200 partners in each market, indicating growth in these regions. Firms like DLA Piper and Baker McKenzie have made significant hires in the Corporate sector, while Wilson Sonsini and Fish & Richardson have bolstered their Intellectual Property practices.

In terms of gender dynamics, men accounted for seven out of every ten partner hires. Notably, 78% of all women partner hires were made by Am Law 100 firms, demonstrating a potential focus on diversity and inclusion within these top-tier organizations.

Report Breakdown: Hiring Metrics

The report provides a detailed breakdown of hiring practices based on Am Law ranking tiers, Revenue Per Lawyer (RPL), Profit Per Equity Partner (PEP), and gender-based metrics. By examining these hiring trends, law firms can gain valuable insights into the competitive landscape and make strategic decisions to strengthen their market presence and service offerings.

Implications for Law Firms and Attorneys

The data from Lateral Link’s research has several implications for law firms and attorneys.

Strategic growth and competition: The increase in lateral moves highlights the need for law firms to plan strategically to remain competitive. By expanding their practice areas and market presence, firms can better position themselves in the evolving legal landscape.

Talent acquisition and retention: As competition for top talent intensifies, law firms need to prioritize both talent acquisition and retention. This can be achieved through competitive compensation packages, flexible work arrangements, and professional development opportunities.

The importance of diversity and inclusion: With an increased focus on hiring, law firms must also prioritize diversity and inclusion initiatives to attract and retain a diverse pool of attorneys.

Emerging legal markets: As the legal industry continues to grow and change, law firms must keep an eye on emerging markets such as Salt Lake City, Nashville, and Austin, and adapt their strategies to capitalize on new opportunities in these regions.

Navigating attorney lateral moves and understanding the key trends impacting law firms and legal professionals today are essential for success in the ever-changing legal landscape. By recognizing growth in specific practice areas, geographical hotspots, and the increasing demand for in-house and government roles, law firms and attorneys can adapt and thrive in the evolving market.

Embracing technology and innovation: Law firms need to keep up with advancements in technology and leverage innovative solutions to streamline operations, enhance client services, and stay ahead of the competition. Firms like Orrick and Reed Smith have been particularly proactive in incorporating technology and innovation in their practices.

Cross-border opportunities: With globalization and the expansion of multinational businesses, law firms must focus on cross-border transactions and disputes, and develop a diverse team with the ability to work seamlessly across jurisdictions. Firms like White & Case and Baker McKenzie have established themselves as global players by expanding their cross-border capabilities.

Focus on client needs: As clients’ needs become increasingly complex and specialized, law firms must develop niche practice areas and expertise to cater to these demands. For example, Winston & Strawn have developed a strong expertise in antitrust and sports law, while Ropes & Gray have made a name for themselves in private equity and asset management.

Collaborative culture: Creating a culture of collaboration and knowledge-sharing is crucial for law firms to foster innovation and deliver better results for clients. Firms like Goodwin Procter and Hogan Lovells have embraced a collaborative approach, enabling them to provide comprehensive solutions to clients across various industries.

Succession planning: Law firms must have a long-term vision and plan for the future, including effective succession planning and leadership development. By grooming the next generation of leaders, firms like Cravath, Swaine & Moore, and Sullivan & Cromwell can ensure a smooth transition and continued growth.

Understanding the key trends and adapting to the dynamic legal landscape is crucial for law firms and legal professionals to remain competitive and successful. By being proactive in their approach to talent acquisition, retention, diversity, inclusion, and strategic growth, law firms can rise to the challenges and capitalize on the opportunities that lie ahead in the ever-evolving legal market. As you navigate these challenges and opportunities, Lateral Link is here to guide you through your journey, offering expert advice and professional support to help you make the best decisions for your career and practice. With a deep understanding of the industry’s complexities and trends, Lateral Link is your trusted partner in shaping your future in the legal profession.