It’s a question we get asked a lot – how much do lawyers earn? – and it deserves some careful analysis
John Bowie* Asking how much lawyers earn is a question that is very much akin to the ‘how long is a piece of string?’ Many of us are interested in the vast sums we read about with top Am Law partners, Magic Circle partners in London or the earnings of leading barristers, but – like everything else – the lawyer earning figures we hear about are relative.
Relative to what, exactly?
Many things, like position, location, area of specialty, age and – regrettably in many cases – gender.
In the United States there are about 70,000 associates and partners at the Am Law 100 firms and the figures on earnings we hear about frequently relate to that cohort. But there are over 1.3 million lawyers and so the focus on the Am Law group deals with just 5 per cent of all lawyers – the lawyers whose earnings we gloat, moan and – if we’re one of them – celebrate with a bottle of the very best French champagne.
But, while most of the Big Law attorneys make considerably more than lawyers working for smaller law firms, as well as in government or in-house roles, there are also cases where lawyers in smaller boutique, personal injury and even small town Main Street law firms can be handsomely rewarded.
We can take a look at how and what these lawyers earn, below. But we should also address a very simple, if largely irrelevant for these purposes, issue of who are the richest lawyers? So let’s get that query out of the way now.
Who Are The Richest Lawyers?
Let’s to to the big money, big law earners first – as check a list of the world’s richest lawyers from BigLawInvestor.com, who have Bangkok billionaire lawyer Wichai Thongtang (pictured left) at the top of the legal rich list at USD1.8 billion.
Thongtank made his money by acting for some of the biggest companies and powerful political figures in Thailand, but made some astute, strategic investments that made him as rich as he is, via his eponymous law firm.
(You can see the rest of the list below)
But what of the standard lawyer working in a decent firm in the US?
The US News & World Report showed in 2019 that lawyers made a median salary of $122,960 in 2019. The best-paid 25 percent made $186,350 that year, while the lowest-paid 25 percent made $80,950.
The USN&WR stats are based on the BLS statistics and the $120,000+ is enough for most people to live on, but there are some key things to think about when looking at the legal salary.
Importantly, there is the weighting of those in the Big Law (read: Big Money) league who make the top end a very big number.
We have reported some of those figures here, such as Kirkland & Ellis who pulled in gross revenues of $5 billion last year, while White & Case, Cravaths, Milbanks and others churn out massive earnings for partners.
The Top 20 Law Firm Earners
The top 20 law firm earners in terms of profit per equity partner (PPEP) are shown below, from Wikipedia –
For instance, those at the top end of Big Law can be earning more than colleagues elsewhere by a factor of three or four. Even for those who pick up the associate bonus and commencement packages can earn amounts ranging from $190,000 to $340,000 and bonuses that range from $15,000 to $100,000 (as reported by the ABA Journal).
Cravaths effectively set the gold standard on payments for US law firms, but there are plenty of others in the running with similar or even larger payments.
Cleary Gottlieb, Milbank, Skadden Arps and others are all there.
And the global giants with strong UK presence as well provide handsome payments with year-end bonuses, including Clifford Chance, Debevoise & Plimpton, Freshfields Bruckhaus and Ropes & Gray.
What Are Law Firm Remuneration Models?
There has been considerable discussion in recent years about how law firms pay their lawyers and what model is best.
There are different models available, even within the same partnership, although mostly it is in the vein of being a true ‘partnership’ where profits are shared between the partners.
However the lockstep model, which has long been favored by many law firms (and equally been the subject of criticism) has been to base earnings upon seniority with partners tiered in terms of their seniority.
For example, a 20-year partner under the lockstep model will earn considerably more than an attorney who is also partner and who has been there five years. The compensation is based upon how many ‘shares’ or ‘units’ that a lawyer has in the firm and so it favors seniority.
This compares to the ‘eat what you kill’ model where partners are compensated upon what they earn and what hours they bill. Generally, the US law firms have favored the latter, the UK firms the former, but that is very much a general rule and it is changing.
Mostly though, the multiple of earnings difference between the highest-earning partner and the lowest-earning will be about 10 times.
So What Exactly is Profits Per Partner?
The PPP figures and calculation is something that is the net profit of the firm divided by the number of partners at the firm. However, whilst seemingly simple, there are some important points that need to be noted that affect the idea of what lawyers earn at these firms under the PPP arrangement.
What are the differences?
First, lawyers who are firm partners are not paid salaries in the way of ordinary mortals. They receive draws or drawings against the firm’s anticipated profit share, which may be monthly or quarterly in most cases).
The amounts they receive may vary considerably although a decent slice of the firm profits will be held back until the end of the year, or even longer, to ensure the firm has the money it needs to pay its overheads, including the bonuses and other payments to its ‘talent’.
Second, the PPP figure is something that is used as a yardstick for the growth, profitability and prestige of the law firm, which is why it is trumpeted through the legal media like Law.com and – to be fair – LawFuel.
It is, if you like, the ‘big swinging dick’ phenomenon, but the salary figures are open to manipulation as it frequently appears that reported figures by these firms do not necessarily accord with the overall performance or profitability of the firm when viewed at ‘ground zero’. Under-performing partners may be stripped of their equity in the firm, which boosts the PPP figure. Not saying that this is any regular occurrence, but it is something to be aware of because of the sheer prestigage and PR mileage that comes with a great PPP figure.
Third, the PPP only applies to equity partners who have an ownership stake in the law firm. There are a large and growing number of non-equity partners drawing a salary despite having the ‘partner’ title and frequently all sorts of other titles.
Four, the PPP figure is not reflective of the ‘what lawyers earn’ story in total because some of the best remunerated partners will make perhaps up to five times the amount earned by the lowest, with most partner earnings around the middle. At some firms this differential may be as much as 20 times what the lowest-earning partner makes. What does this mean? If the PPP figure is $3 million it does not mean that half of the partners are making that money.
And finally, an important point on the PPP ‘lawyer earnings’ figure is that a partner’s share of the profits can be quite different from the actual cash payments that the firm receives. Profits are not always reflected in cash – for instance work-in-progress (WIP) and accounts receivable are both going to lift ‘profits’ for the firm in its books, but they cannot be distributed as cash to the equity-sharing partners.
Are All Partners Created Equal?
Short answer: ‘No’.
It’s also really the long answer, but to provide more detail consider the PPP issue discussed above.
A firm with 300 ‘partners’ may in fact only have one-third that number who share in the profits (ie as equity-shareholders having a share in the PPP). Because equity partnerships are now becoming more rare, there is often a major gap between equity and non-equity partners in terms of what lawyers earn.
The increasingly common ‘eat what you kill’ remuneration model still has major variations too, so that lawyer earnings under this system can still vary to a large extent.
There will be a designated profit pool to ensure that partners who have not had a good year do not suffer large financial reversals personally. After all, even top lawyers can go through dry spells when their revenues are low and their billable hours are down. However, this still means that even an equity partner in an eat-what-you-kill law firm can see major discrepancies in earnings.
Can We Believe The Law Firm PPP Rankings On How Much Lawyers Earn?
The rankings we read about in American Lawyer and elsewhere are all well and good but, as said, there are discrepancies and a certain massaging of figures by the law firms and lawyer salary figures that can go into their creation.
So reading about the largest firms in the US and seeing, say, $5 million a year earnings, there is no way all compensation for the equity partners is that amount.
In fact, it is more likely to be a sub-$2 million figure – still enough to pay for the lake house, a post-COVID European vacation and a top-end Lexus but not the figure you may be thinking when you read the statistics.
And remember that most partners are not equity partners at all and will be earning far less again.
An article in AbovetheLaw looked at two firms – Kirkland & Ellis and Akin Gump – noting that the average income partner at these firms was making about $450,000 in 2011.
These are both excellent and profitable firms, but the figures on non-equity compensation are a stark reminder of why you do not get blinded by statistics on these matters.
Let’s look at the salary or earnings taken in some other major law firms. Wachtells, Sullivan & Cromwell and Quinn Emanuel are among the top 50 firms in the US with the average equity partner touted as earning up to $4 million a year.
In fact, attorney compensation may be well under that figure – let’s say around $1.7 million a year. Many younger partners who are not equity partners would be making less.
As Above the Law noted a few years back, (see New Data on Non-Equity Partner Compensation), using Kirkland & Ellis and Akin Gump as examples-both excellent, profitable firms -t he average income partner at these big name firms was making about $450,000 in 2011. This average figure would include not just young lawyers who have been income partners for 1-5 years, but also longtime service partners who never got equity.
It can therefore be reasonably assumed that the new partners are most likely below the average figure. Taking into consideration the fact that this study was based on just two law firms (albeit a fairly representative sampling) and the factors discussed above, a reasonable estimate for a young partner at a large firm is probably $350-575k for the first few years.
Of course there will be exceptions. Where young partners generate new business or develop their rain-making skills they may get to seven figures, but there are also others where a partner (allowing for health care costs and taxes) makes slightly more or even less than a senior associate the first couple of years, and then have to make their arduous climb up the equity ranks.
Who Are The Richest Lawyers in the World?
|1. Winchai Tohgsang, Thailand||$1.8 bn.||Law & investment|
|2. Charlie Munger||$1.6 bn||Investment|
|3. Bill Neucom, US||$850 million|||
|4. Judge Judy, US||$440 million||Television|
|5. Robert Shapiro, US||$120 million|||
|6. Willie Gary, US||$100 million||Litigation|
|7. John Branca||$100 million||Entertainment law|
|8. Roy Black||$65 million||Criminal & civil litigation|
|9. Jane Wanjiru Michuki, Kenya||$60 million||Law & litigation|
|10. Alan Dershowitz, US||$25 million||Law, writing, consulting|
Why Do Lawyer Earnings Also Vary So Much?
It is clear from the above that most lawyers are not earning those massive amounts we read about in the average annual salary rankings we read about in the legal and business press.
The BLS projects that in the United States there will be over 32,000 new jobs opening by 2029, a growth of 4 per cent.
But to understand the salary scale for lawyers and what lawyers earn you need to also understand the Big Law salary scale, which Joshua Holt (right) wrote about in this article a short time ago.
The key question for many lawyers therefore is just where those jobs will be and what the new openings will provide the top opportunities.
And to earn the big money, there are some considerations that may not appear entirely appealing to many who are not prepared to raise a family by seeing them for a short period in the weekend and working every day – and night – that we all get sent.
The additional fact is that most of the big money, Big Law earners are also those who went to the top law schools and, quite obviously, that is NOT most lawyers.
And finally, some lawyers just work hard and work in areas of law that are lucrative. Others do not do either. Practising family or criminal law in a large city is mostly not going to produce anything like the money lawyers will earn handling corporate law work such as trans-national M&A deals, technology deals or finance and capital raising deals.
There may be other key earning areas like medical malpractice law, tax law
And geographical location can make a difference, as the stats from the USN&WR report indicates –
Why Do Some Lawyers Charge Out At So Much More Than Others?
There are various reasons why some lawyers have far higher billing rates than others, but it is a question frequently asked. Some charge $1500 an hour, some $400 . . and so forth.
As mentioned, above, there is much to do with the nature of the work being handled. Corporate work, for instance working for a Fortune 500 company or working on the Steve Bezos’ separation will bring a far higher billing rate than some parking lot assault case. Obviously.
The lawyers’ reputation also has much to do with it – a higher reputation = higher billing.
Experience and seniority within a firm or generally within the profession will also be important. Obviously a paralegal is going to be billed far less than a senior partner.
And then there are firms that will bill what they think they should be doing and then adjust to reflect what it should be or might be most appropriate.
Naturally, with personal injury attorneys there is the share of awards and that can amount to vast sums – or nothing at all. It would not be uncommon for a successful contingency case to have compensation that is $10,000 per hour or more. That is another story altogether.
What Do Lawyers Earn in Other Major Jurisdictions?
Lawyers’ earnings in other countries remain high, as per the figures seen in the major jurisdiction in the United States and United Kingdom.
UK Lawyer Earnings
As is the situation elsewhere, qualified lawyers (solicitors) in the UK in regional law firms can expect to earn from between £25,000 to £40,000. (USD34,000-USD54,000).
Starting salaries for newly qualified solicitors in larger commercial firms and those in the City will be from up to around £65,000 (USD88,000) with the larger City firms paying £80,000 (USD 110,000) or more.
Generally US firms based in the UK will be paying more money, including bonuses and some trainees can be paid starting salaries of over USD130,000.
The salary range for experienced lawyers will vary considerably also with those who are not yet at partner level earning significant money but partners in the larger City or American-based law firms earning up to seven figures, on par with their US counterparts.
Australia Lawyer Earnings
On average, lawyers earn a salary of $184,958 per year according to statistics from the Australian Tax Office.
This figure is based on the average income of lawyers across all areas of law in Australia after the Australian Bureau of Statistics (ABS) conducted an analysis of 13.7 million individuals in the financial year 2016/17.
So it’s marginally out-of-date but with COVID disruptions it is also a very good indicator of what lawyers in Australia are earning, with the statistics showing the median salary for all occupations was just over $48,000.
Law Jobs site SEEK said the lawyers earning the most were in-house counsel ($129,000), followed by those in construction law ($124,000) and corporate lawyers ($118,000).
New Zealand Lawyer Earnings
Lawyers in New Zealand generally replicate the sort of consistency seen in the other countries.
A salary survey reported by the NZ Law Society in 2020 showed that medium-sized firms (5-20 lawyers) the mean was slightly lower nationally at $49,000; but rose to $54,000 for large law firms.
Lawyers with two years’ experience rose from $58,000 to $64,000 in the same three groups; and for three years it rose from between $62,000 and $79,000 across New Zealand.
However the survey also showed that even for those with four years’ experience working in small and medium-sized firms, there are staff who in 2018 were earning $40,000 or less.
The figures for in-house lawyers showed higher earnings, between a mean of $61,000 and $70,000 across corporate/commercial, central government and local government, but a modest $46,000 for first-year lawyers in not-for profit/other organizations.
Author – John Bowie is LawFuel’s publisher. Follow LawFuel on LinkedIn and Twitter.
==> Read Joshua Holt on The Big Law Salary Scale
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