Most law firms announcing pay hikes are in this select high-profit club
More than 50 law firms have announced increases in associate pay since Cravath, Swaine & Moore set the standard by increasing salaries by $10,000 to $20,000. Image from Shutterstock.
More than 50 law firms have announced increases in associate pay since Cravath, Swaine & Moore set the standard by increasing salaries by $10,000 to $20,000.
Most of those firms have two things in common, Law.com reports. Their profits per equity partner are more than $2 million per year, and they have more than $1 billion per year in gross revenue.
All but a third of the firms announcing Cravath matches are ranked in the top 50 in terms of gross revenue, according to Law.com.
Above the Law is keeping track of the pay hikes in its 2023 compensation scorecard. Cravath’s scale ranges from $225,000 for the class of 2023 to $420,000 for the class of 2017.
Many matching firms added the class of 2016 and more senior associates to the scale, and are paying them $435,000.
The raises “may not make a big dent on partner profits” at firms with $2 million-plus profits per equity partner, according to Law.com. “The salary raises—an average of about $15,000 more for each associate—could work out as an extra $60,000 cost for each partner, considering the average leverage of the Am Law 100 firm is roughly four lawyers to one equity partner,” the article said.
Lisa Smith, a firm consultant at Fairfax Associates, told Law.com that firms with more than $2 million in profits per equity partner tend to be competing for the same talent.
“When you get below that, certainly some firms will match, but others, particularly that are based in tier two or the next tier of markets, that don’t have quite the same compensation levels anyway, I think will probably not match or match fully. Many already don’t,” Smith told Law.com.
