.jpeg)
(Reuters) - More U.S. law firm associates learned on Wednesday that their paychecks will soon be fatter after Cravath, Swaine & Moore's announcement of salary increases opened the floodgates for other firms to follow.
Major U.S. firms including Paul, Weiss, Rifkind, Wharton & Garrison; Cleary Gottlieb Steen & Hamilton; Baker McKenzie; and Dechert on Wednesday rolled out new salary scales for associates starting at $225,000 for first-year lawyers and ranging up to $435,000 for their most senior associates.
The figures align with the new base salary scale Cravath announced internally late on Tuesday. Paul Hastings and McDermott Will & Emery quickly matched the same day.
Milbank three weeks ago became the first major U.S. law firm to unveil higher salaries in 2023, but other firms had been quiet until Cravath's move this week. The raises by Cravath and others match Milbank's increases for more junior associates and exceed them for senior associates.
A Milbank spokesperson did not immediately respond to a request for comment on Wednesday.
Salary increases typically come when associates are in high demand, but that is not the case this year, said Peter Zeughauser of law firm consultancy Zeughauser Group, who called the increase "surprising."
There is excess capacity of associates at many firms, and less profitable firms may be inclined not to match the latest round of raises, he said.
Major law firms increased associate pay just last year. That increase is still creating stress for some firms, and "another raise will create more," Zeughauser said.
"This is a hard decision for a lot of firms," he said.
Average revenues for the country's biggest law firms grew by less than 5% during the first three quarters of 2023, according to a recent Wells Fargo report, and gains in profitability were mainly among the very largest firms.
Advising on mergers and acquisitions — a key practice for most large firms — has been hampered by the slowest nine-month dealmaking period since 2013, according to the London Stock Exchange Group.
Firms may nevertheless feel they have no choice but to follow the pack.
"Once one or two name-brand firms make such a move, competitive reputation and the perceived requirement for prestige purposes to match "the going rate" means rationality and hard-core financial justification go out the window," said Bruce MacEwen of law firm consultancy Adam Smith Esq.
Skadden, Arps, Slate, Meagher & Flom, and Hogan Lovells also raised salaries on Wednesday. Proskauer Rose also has reportedly increased salaries, according to the legal blog Above the Law. A firm spokesperson did not immediately respond to a request for comment.
The law firms' salary announcements have also all included year-end bonus figures ranging from $15,000 to $115,000 by class year. At least two of the firms said in internal memos they would also hand out additional bonuses to some associates based on work or hours billed.
Reporting by Sara Merken