The legal talent war that broke out in 2021 shows no sign of slowing down
- Law Firms
- The number of associates leaving U.S. firms increased 51% this year
- Associate compensation is at an all-time high as firms scramble to recruit and retain lawyers
(Reuters) - It's a good time to be an associate at a major law firm—provided you don’t mind working long hours.
A surge in client demand and shortage of lawyers to meet it prompted large U.S. firms to roll out multiple bonuses, boost base salaries, and find creative ways to stand out from the competition. Several legal recruiters and industry experts said they’ve never seen such a fierce war for associate and partner talent, and they expect the red-hot hiring market to carry on well into 2022.
“I don’t see things slowing down at all,” said Kate Reder Sheikh, a recruiter with Major, Lindsey & Africa, noting that law firm partners have told her that deal work continues to flow in while litigation is picking up after a pandemic slowdown. “All the soft indicators we look at are suggesting that the current market will continue.”
Competition for lawyers was a major focus of every meeting that Citi Private Bank’s Law Firm Group had with clients in 2021, said Gretta Rusanow, who heads the group’s advisory services. As long as demand for legal services remains strong—and industry analysts predict it will—firms will continue to aggressively hire, she said.
According to data from Decipher Competitive Intelligence, associate moves between U.S. law firms were up 51% in 2021 over the average from the previous four years. Nearly 14,000 associates had jumped firms by mid-December of this year, up from fewer than 9,300 in 2020.
Every major legal market saw double-digit growth in associate moves over the previous four-year average, though Miami, Chicago, New York, and Los Angeles were particularly active, Decipher found. Partner moves were also up 8% nationwide over the previous four-year average.
One of the first big signs of the hot hiring market came in June, when top U.S. law firms raced to match salary increases that saw first-year associate pay go from $190,000 to $205,000. Firms also doled out associate bonuses in the spring and the fall and offered “special bonuses” to high billers on top of their traditional year-end bonuses, offering some payouts in installments that required lawyers to stick around.
“It’s hard to leave a firm when there is a bunch of money on the table,” Sheikh said.
Signing bonuses, once offered only to the hottest prospects, became commonplace in 2021, she added, and hiring times accelerated. Some laterals were interviewed and hired within the span of two weeks, when that process would traditionally require a month or more, Sheikh said.
Law firms’ recruiting and retention efforts also extended beyond compensation in 2021. Kirkland & Ellis knocked one year off its path to equity partnership. Sidley Austin rolled out new managing associate titles and MBA training. Quinn Emanuel Urquhart & Sullivan said all of its lawyers can work remotely indefinitely. Cravath, Swaine & Moore abandoned its longstanding lockstep partner compensation model—a move recruiters said should help the firm retain its top performers.
But 2021’s competitive hiring market is taking a toll on bottom lines. Law firms’ direct expenses rose quickly in the second half of the year, according to Thomson Reuters Peer Monitor Index. The increases were partially offset by overhead cost reductions in 2020 and into 2021, but those travel and office expenses have started to return, said Bill Josten, manager of strategic enterprise in thought leadership for the Thomson Reuters Institute.
Clients could also eventually balk at escalating associate pay, something they have largely been silent about so far.
“The more you pay your associates, there’s also a risk of angering your clients because they might say, “Well, you’re going to just charge me more,” Josten said.
Paul Hastings chair says partner hiring game has changed: 'I've never seen it like this'
Law firms had another big quarter, but associate pay is taking a toll
Recruiters try to keep up as demand for associates hits overdrive
Our Standards: The Thomson Reuters Trust Principles.