2016-2017 Legal Hiring Trends and Outlook
Money! By Thomas Galvez / CC BY 2.0
If you’re a California attorney looking to make a career move, you’re in luck. 2017 is on track to be an interesting year for both existing and prospective Biglaw associates. On June 6, 2016, the nationwide legal industry was shaken up by a Cravath-led pay raise in which associate base salaries were increased across the board, with 1st-year associates earning $180,000 (up from $160,000) and 8th-year associates earning $315,000 (up from $280,000). Though Cravath, Swaine & Moore operations are largely tied to their New York office, their pay raises have historically ushered in Biglaw salary restructuring on a nationwide scale.
In the four months since Cravath’s associate pay raise, numerous Biglaw firms (and several middle-market firms, such as Morrison Cohen) have followed suit, some more begrudgingly than others. Not all pay raises have been as straightforward as those instituted by Cravath, however, and many attorneys are concerned about the ramifications of such pay raises in an industry where the general trend seems to point at narrowing profit margins – with some pointing at the risks of recruiting slowdown and legal job placement issues.
Salary Bumps – Details and Potential Ramifications
Diverse Implementations
Though – ideally – more Biglaw firms would implement an unconditional baseline pay raise, many have implemented conditional pay raises packaged with new hourly and standards requirements.
To ensure that their new baseline pay grades are financially tenable, some firms have increased the yearly minimum billable hours requirement to compensate. It is not uncommon to see new billable hours requirements ranging from 100 to 150 additional billable hours per annum.
Increased billable hours requirements could result in difficulties for associates in departments where employee utilization is high and where the volume of new work is relatively low. If there is a dearth of excess work, then associates may have to compete over the scraps, leading to stress over satisfying minimum billable hours and tension between colleagues.
Many firms that have implemented baseline pay raises for associates in 2016 seem to have also implemented a compressed salary scale. Salaries for junior associates at these firms are aligned with higher market rates, while salaries for midlevel and senior associates are “compressed” to below market rates. As we move towards the end of 2016 and into 2017, more and more firms are likely to implement a compressed salary scale to account for the increased junior associate salaries. These firms may therefore not be an ideal lateral move for midlevel and senior associates.
Potential Ramifications for the Legal Job Market
The Cravath-led pay raise cycle will almost certainly have a ripple effect on the entire legal industry going into 2017. Client reactions to the increase in associate pay have thus far been mixed, though time will tell how firms will absorb the cost going forward – and whether those costs will leak into client rate negotiations. Currently, Biglaw firms at the top-end of partner compensation are able to better absorb these new costs (as partner compensation will be proportionally reduced if profits are affected, of course).
Perhaps the firms most effected by the increase in baseline associate salaries are top regional firms, and high-end boutique firms that pride themselves on Biglaw-quality services. Both compete with Biglaw for legal talent.
Prestigious regional firms that regularly attract top talent have also jumped into the fray, with several such firms increasing baseline salaries by more than 10%. Competition over talent is fierce, and top regional firms want to ensure that prospective laterals are not drawn to higher rates elsewhere.
Boutique firms, similarly, will be dragged towards the new pay scale by market forces. The success of a boutique firm depends on its ability to recruit and maintain top-quality legal talent, so they must respond to these salary changes if they intend to compete. If a boutique cannot offer salaries that meet the new associate market rate, they may have to rely on secondary “soft” benefits such as work-life balance, opportunity for higher quality work, and a more promising structure for advancement, among other things.
Some attorneys have expressed concern over potential layoffs in response to the baseline pay raises. It is somewhat early to make sweeping statements as to firms’ ability to absorb these increased costs, but layoffs – if they do occur in response to an implemented pay raise – are likely to target legal support staff rather than attorneys.
Of course, layoffs affecting legal support staff will have a significant effect on a firm’s informational and process infrastructure and may negatively affect an attorney’s ability to work efficiently. If you are lateraling to a firm that has moved to the new pay scale, it’s important that the firm is not “jumping the gun,” so to speak. You don’t want to find yourself in a situation where you don’t have the support staff necessary to effectively do your job.
On the other hand, small firms and middle market firms that aren’t competing for top legal talent are unlikely to be affected by the Cravath-led pay increases. If you’re an associate at a small firm on the lookout for greener pastures elsewhere, now is certainly as good a time as any to consider lateraling to a firm where the associate baseline pay scale has been increased (or will be increased in the foreseeable future).
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Understanding the nuances of a changing legal industry – and how to effectively leverage one’s background and expertise in the current legal market – can be difficult for an attorney looking to change jobs.
If you are in search of exciting new legal job opportunities, speak with a legal recruiter at Garb Jaffe & Associates. We have extensive experience placing attorneys with law firms and corporations located across California, and will advise throughout the process to ensure that you secure an ideal placement.
Call us today at (310) 207-0727 for a free consultation.