How Does Your Salary Compare?

During the late 1990’s when dot-coms were flourishing, the competition between law firms to attract and retain top associates was intense and new associate salaries rose significantly each year. In 1999, a Silicon Valley firm named Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, shook the legal community by offering new associates a starting salary of $125,000 with a guaranteed bonus of $20,000. This represented a 25 percent increase in the average base salary and even more for the total compensation package. Other firms in major cities around the country were forced to follow Gunderson’s lead and annual salaries increased by about 30 percent between 1999 and 2000. New associates reaped the benefits.

The boom was driven by the proliferation of dot com companies that, in addition to good salaries, offered the potential of big rewards from stock options. Law firms were forced to raise salaries to keep the top talent from being siphoned off. So what’s happened since the crash of the Internet boom?

For about five years the pressure on firms to increase salaries was minimal. Firms with a national presence, largely on the east and west coasts, leveled out at a base salary of about $125,000, plus bonuses. Although base salaries in the large firms remained steady, bonuses fluctuated, allowing firms to differentiate themselves. At least one New York firm was rumored to provide a total compensation package of $200,000 to first years in 2005. At the same time, polices of the larger firms had a trickle down affect and starting salaries gradually went up in smaller regional firms and boutiques around the country.

Associates Update Poll

According to the National Association for Law Placement, Inc.^® (NALP) in the summary of their 2005 annual survey of associate salaries, median salaries for first years were as follows:

• Firms with 2 – 25 attorneys—$67,500
• Firms with 26 – 50 attorneys—$80,000
• Firms with 51 – 100 attorneys—$83,000
• Firms with 101 – to 250 attorneys—$88,000
• Firms with 251 – 500 attorneys—$105,000
• Firms with 501 or more attorneys—$125,000

In addition to differences by size, salaries also vary by geographic region, with the coasts having the highest averages followed by the South and then the Midwest, with significantly lower averages than the other regions. However, top starting salaries remained steady at $125,000 from 2001 through the fall of 2005.

The NALP summary is available at http://nalp.org/press/details.php?id=56.

In the fall of 2005, two boutique firms in Los Angeles, Irell & Manella and Quinn Emanuel Urquhart Oliver & Hedges, raised their starting pay to $135,000. They were quickly followed by larger west coast firms, including Gibson, Dunn & Crutcher, O'Melveny & Myers and Paul, Hastings, Janofsky & Walker.

It was only a matter of time before the big New York firms responded, led by Sullivan, which announced in early February, that it was raising starting salaries to $145,000. Within days, Simpson Thacher & Bartlett, Davis Polk & Wardwell, and Milbank, Tweed, Hadley & McCloy announced they were raising salaries to the same level as Sullivan. The ripple effect went into action and other top firms raised their salaries, which, in turn puts pressure on regional and mid-size firms. Another factor putting pressure on regional firms is that some national firms, such as Skadden Arps Slate Meagher & Flom, have unified their salaries across all their offices, not just in major cities like Los Angeles and Washington, D.C.

But remember, we’re talking about base salaries. Firms indicated that they would adjust bonuses accordingly, meaning that total compensation might not go up at all. Sullivan explained that it was trying to “rebalance” associate compensation by spreading it more evenly throughout the year, rather than paying out as much as $35,000 or $40,000 in one lump-sum at the end of the year. Clearly, law firm management is struggling to come up with the right mix of compensation, billing rates and billable hours requirements to retain top talent without losing clients and maintaining payouts to partners. Whatever the eventual outcome, it’s a good time to be a young associate.

You can find out more about associate salaries by checking LexisNexis at www.lexis.com:

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