A slower legal market is not necessarily slowing law firm salary payments or from making pay increases and bonus payments, according to the latest reports.
The payments are seen as a strategic move to stay competitive amidst a dampened demand in the legal industry with major law firms like Cravath, Swaine & Moore, who set the so-called ‘Cravath scale’ for biglaw payments, and Milbank having recently upped the ante, increasing salaries for senior associates by up to $20,000 and announcing year-end bonuses ranging from $15,000 to $115,000.
We recently reported how Milbank has elevated first-year associate salaries to an unprecedented $225,000. Scott Edelman, chair of Milbank, cited the rising cost of living as a key factor in this decision.
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Big Law Bonus Payments
This trend of end-of-year bonuses is a common practice in U.S. law firms, especially in a year marked by a sluggish M&A market. But big law firms have navigated the salary scale effectively with an eagle eye upon what each of the large law firms and top boutiques are paying.
Cravath’s new law firm salary scale, effective January, ranges from $225,000 for 2023 law graduates to $420,000 for those from the class of 2017, marking an increase of $10,000 to $20,000 from the previous year.
The firm will also distribute bonuses between $15,000 and $105,000. While Cravath remained silent on the matter, other firms like Paul Hastings, Boies Schiller Flexner, and Simpson Thacher & Bartlett have reportedly followed suit, with some offering even higher salaries and bonuses.
This shift isn’t limited to the U.S law firms by any means, although they have tended to lead the way and have prompted the Magic Circle law firms in London to follow. Hence firms like Freshfields Bruckhaus Deringer and Herbert Smith Freehills are also aligning their U.S. lawyer salaries with the Cravath scale.
Despite a slowdown in deal activity, U.S. law firms have seen revenue growth in 2023, driven by significant increases in billing rates, as reported by Wells Fargo’s Legal Specialty Group.
However, not all lawyers are guaranteed full bonuses. Firms such as Simpson Thacher & Bartlett and Davis Polk have warned that bonuses could be reduced for associates who don’t meet office attendance requirements, reflecting a push for more in-person presence post-pandemic.
The current economic climate is also exerting pressure on law firms, leading to lawyer headcount reductions, which we have reported on since the beginning of 2023.
The reductions follow aggressive hiring during the pandemic and the need for firms to retain a competitive position in a busy market.
But things have changed. Firms are resorting to subtle management of associate ranks, including reassigning lawyers to busier practices and implementing stricter performance reviews, as noted by Citi Private Bank’s law firm group and Hildebrandt Consulting.
We also recently reported on how the major biglaw firms are paying their associates in our ‘Vault rankings’ law firm salary article.
Author – Ben Thomson, LawFuel contributor
