Law Firm Recruitment Costs Continue To Press Law Firm Margins

Law firm recruiting continues to rise, along with marketing expenses, according to recent US legal industry reports and the likelihood of continued cost rises is only set to continue during 2022.

The situation is similar in jurisdictions beyond just the United States, with UK showing similar massive cost increases in the face of intense competition for legal talent. The Times reported this month about “stinging” exit fees charged by legal recruiters in various companies, which are payable should the employee leave before a pre-set time period.

While law firms may not be involved in the exit fee situation the high recruitment fees and massive competition on both sides of the Atlantic continues to pressure law firm margins and raise concerns about their ongoing profits.

Big Law Pay Scale War

The rises in legal pay are well documented with the average rate for Milbank in the US for first-year associastes being $215,000, with second, third and fourth-year associates experiencing $10,000 increases with senior associates getting around $20,000 and hitting a high of $385,000 at the top end.

The Big Law UK firms – both US-based and Magic Circle – have been in their own Big Law pay war, lead by the US law firms that have become used to the giant pay increases seen across the Atlantic.

The US pay war started with Milbank announcing its news scale and swiftly followed by Davis Polk & Wardwell and Cravath Swaine & Moore which all announced a series of compensation increases that saw pay increases by 13 per cent to $415,000 for their most senior associates.

The mounting law firm recruitment costs and high competition for legal talent, combined with healthy lateral recruitment market is something law firms seem bound to, even if they would like nothing more than to see the recruitment situation return to what they perceive s normal.

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