The results of the 2014 Associate Salary Survey conducted by the National Association for Law Placement Inc. (NALP) reveal, among other things, the changing landscape of the largest law firms in the U.S.
Although first-year associate salaries of $160,000 are still common at large firms of more than 700 lawyers, especially in large markets, the prevalence of $160,000 salaries at these firms as a whole is far below what it was just five years ago, accounting for just over one-quarter of the salaries reported by firms of this size. In 2014, first-year associate salaries of $160,000 accounted for 27 percent of the salaries reported by firms of that size.
By contrast, in 2009 nearly two-thirds of first-year salaries were reported as $160,000, confirming the characterization of 2009 as the high point for large firm salaries.
The data suggest that the reason for the shift, however, is not that individual law firm offices are paying first-year associates less than they have in the past. Instead, as more law firms have grown through acquisition and merger, the largest law firms are not as similar to one another as they used to be.
In addition to elite global firms, there are many firms with more than 700 lawyers that are made up of many smaller regional offices, none of which pay the benchmark first-year salary of $160,000, and, as a result, a larger percentage of large law firm starting salaries fall below that mark.
With few exceptions, the $160,000 salary also stands as the high salary paid to first-year associates, as it has since 2007 when some firms first raised salaries from $145,000.
The national median first-year associate salary at the largest firms was $135,000 in 2014, the lowest since 2006. Since 2008, however, $160,000 has stood as the single most commonly reported
salary, with $145,000 generally a distant second. As might be expected, in many markets, including Chicago, Los Angeles, New York, and Washington, DC, first-year salaries of $160,000 are generally still the norm at the largest firms, although, following the national pattern, they are not as widespread as they were just a few years ago. For example, in 2009, about 90 percent of offices in firms of more than 700 lawyers in Los Angeles and Washington, DC reported a first-year salary of $160,000; in 2014 only about 40 percent did so, resulting in medians of $145,000 and $150,000 in those cities, respectively.
In firms of 251-700 in Chicago and Los Angeles, a number of firms pay first-year associates $160,000; however, the number paying less is large enough to result in medians of $150,000 and $145,000, respectively. In Washington, DC the majority of firms of this size reported a $160,000 starting salary. The median in San Francisco for firms of 251 or more lawyers is $145,000, reflecting more first-year salaries of $145,000 or less than salaries of $160,000 — and thus not enough $160,000 salaries to return the median to the $160,000 figure, which was reached only in 2009. Only in New York is the $160,000 starting salary still dominant, with about 75 percent of firms of more than 250 lawyers paying that amount and about 90 percent of firms of more than 700 lawyers reporting that as the first-year associate salary.
The survey reports that the overall national median first-year salary at firms of all sizes was $125,000, unchanged since 2012. Medians ranged from $68,000 in firms of 2-25 lawyers to $160,000 in firms of 251-500. The latter figure is unchanged from 2013. In larger firms of 501-700 the median was $125,000, as it has been since 2012. In the largest firms of 701+ lawyers the median was $135,000, after standing at $160,000 in all but one of the prior six years. These figures demonstrate that not all very large firms pay $160,000 to start, even in major markets, and that not all firms that pay $160,000 to start are the very largest firms.
“In the simplest terms, it is fair to say that law firm starting salaries are flat. The fact that the incidence of $160,000 as the starting salary at the largest law firms is less than it was before the recession is really more a reflection of the changing contours of the large firm market,” said James Leipold, NALP’s Executive Director, “not the fact that law firms are paying entry-level associates less than they used to.
Many law offices that are part of large firms, Liepold noted, particularly those in the largest markets, continue to pay $160,000, “but the data since 2009 clearly show that the large firm market now also contains many firms that do not pay $160,000. In some ways the data simply reflect the growing cohort of large firms, and it shows that they are not a monolithic entity.
In many markets starting salaries of $145,000 or $135,000 or even less are the norm.”
In recent years, a number of firms have moved to a compensation system in which associates move through levels, with compensation decisions within each level primarily based on skills mastered rather than on class year. Firms using a levels-based system typically have three, or sometimes four, levels. In 2014, the median level of compensation within the first level was $112,500 in firms of more than 700 lawyers, and $135,000 overall. The median in the second level of compensation was $155,000 in the largest firms and overall. The respective figures for the third level were $187,000 and $174,000. Compared with 2013 there was less reporting of levels-based compensation information. In general, however, average salaries reported for each level align with those reported for 2013.
A total of 560 law offices responded to the survey, providing salary information as of April 1, 2014. With over 12 percent of respondents representing firms of 50 or fewer lawyers and 49 percent representing firms of more than 500 lawyers, the report sheds valuable light on the breadth of salary differentials among law firms of varying sizes at the national level.
As expected, each year of associate experience brings several thousand dollars in increased compensation: median salaries for eighth-year associates ranged from $101,000 in small firms to over $235,000 in firms of 251-500, with a median for all reporting firms of $169,000.
NALP is an association of more than 2,500 legal career professionals who advise law students, lawyers, law offices and law schools.
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