Money might not be the only factor involved when partners start thinking about changing firms, but it’s always a large part of the conversation.
And the same questions come up again and again: Is my firm’s compensation model competitive? Am I being paid what I’m worth? And if not, what are my options?
One thing we tell everyone: law firm compensation is shifting, but not every partner is benefiting equally from these changes.
Over the past year, we’ve seen record-breaking bonuses, rising partner pay, and changes in how firms handle lateral guarantees. However, firms are also making cuts based on performance.
Some partners are seeing big increases. Others are taking unexpected hits.
If you’re watching these shifts and wondering what they mean for you, you’re not alone. Here’s what you need to know about the latest compensation trends.
How law firm compensation trends are impacting partners
The ever-changing landscape of attorney compensation directly impacts your earning potential, both in the long- and short-term.
As firms adjust their pay structures to stay competitive and protect profitability, knowing where the market is headed can help you set intentional career goals for yourself.
1. Compensation continues its upward march
Last year, we were surprised to see Milbank lead the charge to record-breaking bonuses and pay increases. But they did it again this summer, rolling out bonuses for associates and special counsel. (They were the only firm to offer summer bonuses.)
Partners are also seeing increases, with partner compensation doubling over the last decade and up 26% over the previous two years.
However, firms are also more rigorously adjusting compensation based on performance. The top dollars go to those who bring in revenue. Throughout the market, 10% to 30% of partners see pay cuts because they are bringing in less business than they used to.
2. Associates have options
Milbank was the only AmLaw 100 firm we know of to offer these outsized summer bonuses, which makes it stand out as a place where lawyers want to work.
Some firms followed suit as a way to stand out and attract associates. For example, Selendy Gay and Elsberg Baker & Maruri awarded total associate bonuses ranging from $23,250 to $157,250 and $32,250 to $226,250, respectively, well beyond traditional market rates.
This matters because if you need good associates to help you do your work, you want to understand what your firm is doing to attract and retain the right people.
With first-year associate salaries rising to $225,000 at major firms and referral bonuses reaching $50,000, competition for talent is fierce. If your firm isn’t adjusting compensation strategies, it could struggle to bring in and keep top associates—which, in turn, impacts partners relying on their support.
Some firms may be overpaying, but some aren’t paying enough. Where does your firm fit, and does its strategy fit yours?
3. Lateral partner pay guarantees
We’ve found that first-year guarantees are common in the lateral partner market. After that, the expectation is that you will bring in the business to support your income.
There is a suggestion that longer-term guarantees may occasionally be possible. We’re seeing some firms offer two-year guarantees. Guarantees that are longer than that are often tied to specific situations, such as building a new practice area from scratch, where you may need a longer runway.
The business cycle also plays a role: lateral partners have more leverage when the market is strong.
Underperforming lateral partners have burned firms in the past, so many firms will try limiting their exposure and not offer long-term cash guarantees. (But when there are guarantees, they aren’t always cash. Firms may guarantee a percentage of business or equity shares.)
I’ve found that very confident partners can do better by focusing on earning more of what they bring in over time rather than upfront guarantees. You’re changing firms so you can work better, and if you can bring in the business, take the percentage, not the cash.
4. The role of non-equity partners is evolving
Over the past few years, non-equity partnerships have become more prevalent. Firms see this as a way to:
- Raise rates to partner rates without changing the firm ownership structure
- Support non-equity partners with business development
- Create an alternative career path for those who don’t want to do the business development work of full partners
In some cases, this strategy helps promising associates strengthen their book of business and become equity partners. But not always—and there are concerns about exactly how this structure will work.
Paying non-equity partners more money without requiring them to bring in business can create financial issues. Also, non-equity trends often do not clearly show how they will be compensated. This leads some firms to work on incentive structures, and some are concerned that non-equity partners create “lesser-class citizens” within the firm.
There’s also been some legal action. This case against Duane Morris claims they used the non-equity partnership model to shift income, systematically underpaying some and overpaying others.
How this will turn out is unclear, but it does seem logical that creating a second class of partners might lead to friction. Non-equity partnerships are likely here to stay, even as firms debate how this structure will work in the long run.
If you are considering a non-equity partnership, be sure you understand the compensation system and your rights as a non-equity partner. These details will be essential as the market shifts.
5. Value-added billing is catching up to billable hours
Billable hours are the norm, but this topic occasionally surfaces as firms consider how to take a more value-added approach to billing. Some firms use value-based billing, which offers certain results for a fixed price.
In this case, your compensation will be less about billable hours and more about creating repeatable deliverables quickly.
Only a few firms use value-based billing, though some suggest that as AI systems take over more of the timely work, we’ll see more value-based and less hourly billing.
That could happen, though we expect the billable hour to be around for a while. We also expect that your compensation will be some function of the hours billed, whether yours or your team’s hours.
Making trends work for your compensation
Let’s look at how you can apply these trends to your compensation goals. While every attorney should focus on their unique situation, there are a few things we encourage everyone to think about.
Know your market value
Law firm compensation varies based on practice area, geography, and firm size. To understand your market value, look at your numbers compared to what firms pay partners with similar books of business.
(But it’s not just salary that factors in! Rate flexibility, cross-selling opportunities, and firm investment in your practice are important parts of the equation.)
Track your contributions
More than ever, firms are tying partner pay to performance, so you need a clear record of your business generation, client retention, and firm-wide impact. Track key metrics like origination credit, client growth, and practice expansion to make a strong case for your business plan.
Understand your firm’s pay structure
Does your firm—or a firm you’re considering switching to—reward rainmakers? Is there transparency around bonuses, equity, and profit-sharing?
When you know how decisions are made, it’s easier to decide if your firm is the right place for you—or if another one would better align with your goals.
Be strategic about negotiation
If you’re considering a lateral move, compensation structure should be part of your due diligence. A well-prepared lateral partner Business Plan can help clarify your priorities and position you for a better deal.
Think beyond the base salary
It’s not just base salary that impacts compensation. Guarantees, origination credit, profit-sharing, and long-term growth potential contribute to your earnings.
That’s why we always encourage candidates to look at the big picture—do you have the right staffing, resources, and firm support to grow your practice?
The right firm is more than a paycheck—it’s a platform
Every day, we help partners find the firm that’s the exact right, perfect fit—including the right compensation model. But pay is just one piece of the puzzle.
If you’re feeling frustrated or uncertain about your options, let’s talk. You may already be in the right place and need to renegotiate some terms.
Whatever your situation, my priority is making sure you’re set up for success. Give me a call, and let’s figure out the best path forward for you.
