In-House Compensation Trends and Issues
In recent years — and particularly in the past year as Biglaw firms begin to ramp up compensation for associates — in-house attorneys have been exposed to significant pay pressure, which has pushed many to reconsider a firm career.
Traditionally, there has always been a substantial pay disparity between law firm and in-house pay (even when controlling for factors such as attorney experience, legal specialization, and firm industry focus). Despite pay concerns, in-house recruitment has rarely struggled in terms of applicant demand.
In order to secure skilled and experienced candidates, corporate in-house positions have long been marketed as featuring:
- Better work-life balance
- More flexible scheduling
- Opportunity to engage with the business-side
- Subject matter diversity with regard to assignments
- Project management opportunities
- Unique structural advantage of having a single client
The reality of in-house work is not necessarily out-of-comport with the projected image that is sold to prospective hires. These accumulated advantages can — depending on the in-house position — certainly be realized by attorneys moving to an in-house career track from a Biglaw career track. Many attorneys who have grown tired of the ultra-competitive nature of Biglaw work and office politics desire the slower pace and potentially more collegial atmosphere of an in-house department, even if making the move to an in-house position will require a sacrifice in terms of overall compensation.
In-house compensation — though it may lag behind comparative Biglaw compensation — must remain somewhat competitive in order to draw attorneys to such positions and to retain existing talent. If compensation lags too far behind that of law firms, then attorneys may feel squeezed by increasingly tight pay pressures and choose to forgo an in-house transition and return to a law firm career track.
So, from a compensation perspective, what issues are in-house departments presently contending with? Let’s take a look, relying on data drawn from various 2016 studies of the legal industry.
Associate Pay Has Increased
In 2016, for the first time in nearly a decade, Cravath raised associate salaries, leading the way for the rest of the Biglaw industry. Though Biglaw positions were already better compensated than comparative in-house positions, the new wave of associate raises has further widened the gap, enhancing the pay pressure on in-house attorneys. Certainly, Biglaw associates who might have initially had an interest in transitioning in-house may find the decision much more difficult in 2017 and beyond.
In-House Salary Increases Have Slowed
Across industries, the annual salary rate increase for in-house attorneys has seen an annual increase of only 4.2%, with some industries seeing increases as low as 2.4%. It’s clear that in-house compensation is stagnating in general, though larger, more successful companies appear to be better able to provide substantial compensation to in-house attorneys — in such companies, overall company revenues appear to be adequately trickling down in the form of salary increases.
Industry Influences Compensation
Depending on the industry, in-house attorneys earn substantially different salaries. Though the energy industry has experienced low annual salary increases, they top all other industries in terms of overall compensation for in-house attorneys. Generally speaking, the energy, healthcare, and finance industries paid their in-house attorneys best.
Litigators Report High Levels of Dissatisfaction
Though a large percentage of in-house attorneys — regardless of their particular role in the department — report dissatisfaction with compensation, litigators (especially those in the service industry) seem to be most dissatisfied with compensation as compared to their peers. With increased pay pressure being applied by Biglaw in 2016, it appears likely that in-house litigator turnover will jump in 2017 and beyond.
Substantial Numbers Report a Willingness to Seek a New Position
Though a mass exodus of in-house attorneys is not expected, by any means (as there has not been a sea-change in the nature of compensation in the legal market), it’s safe to say that turnover will become a significant issue in the future if companies fail to adequately respond to the compensation concerns of their existing in-house attorneys. Reports reveal that significant percentages of in-house attorneys (40% in one study) are open to considering a career move as a result of dissatisfaction with compensation.
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In-house positions offer a number of advantages compared to law firm positions, though compensation is and will likely continue to be a core issue for both existing in-house attorneys and those looking to transition to an in-house position.
If you are an attorney looking to transition in-house, speak with a Bay Area legal recruiter at Garb Jaffe & Associates. We have extensive experience placing attorneys with prestigious corporations and in-house departments 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.