Economic Slowdown Isn’t Hurting Law Firm Bonuses

Maybe the advice and not-so-subtle urging of our parents (and grandparents, and aunts, and uncles, and college professors) was right: We should’ve gone to law school.

As 2023 wound to a close, major law firms across the US doled out hefty bonuses and annual raises, according to a Financial Times report last weekend. How’s that for some Christmas spirit?

Legally Fond

A slowdown in M&A activity meant Wall Street employees didn’t necessarily have it easy in 2023. Nor did those in other professional services, like accounting. But lawyers, especially the clever bunch servicing the finance world, unsurprisingly took life’s lemons and conjured up a lemonade spiked with plenty of billable hours. One tactic employed nearly industry-wide to counter the slowdown in dealmaking: increased billing rates. According to a recent Wells Fargo poll of 120 law firms, billing rates were up nearly 8%, an unprecedented rise. 

That industry-specific instance of inflation fueled a very happy holiday season:

• According to a source who spoke with the FT, Cravath — a law firm which typically sets salary standards for Wall Street’s legal players — is increasing starting salaries in the New Year for new recruits by as much as $20,000. The firm also distributed bonuses worth between $15,000 and $105,000 this year.
• The new payscale has been matched by firms including Boies Schiller Flexner, Simpson Thacher & Bartlett, and Paul Hastings, per the FT. That means most lawyers in the sector who graduated in 2023 are earning starting salaries of $225,000, while those just a few years older tend to make as much as $420,000.

Remote Detonated: Some lawyers, however, received a comparative lump of coal in their bonus stockings. In the ongoing war to return workers to expensive and fancy office space, a number of Manhattan firms — including Davis Polk and Simpson Thacher & Barlett — have tied bonus amounts to return-to-office policies, according to the FT. Sure, trading the cubicle for the couch is a lot more comfortable. But just think of how many couches you could buy with a six-figure bonus check.