In a pre-Covid galaxy far, far away, compensation in the legal profession was a rocket heading straight for the sky. From associates in Big Law (1st year associates earning a base salary of $190,000!) to Chief Legal Officers (earning up to multiple millions a year) and everywhere in between, the money was a far cry from the legal profession of yesteryear.
Several factors contributed to the rise in lawyer compensation including a strong economy, the emergence of new and life-changing technologies, a robust hiring market, increased value placed on lawyers, the expanding in house legal department, increased lawyer mobility…and a more limited candidate pool. It seemed like the end to this compensation explosion was nowhere in sight.
It will be a year that will go down in history – and as one that shepherded in an invisible invader that brought the world to a screeching halt…and to its knees. As scientists tried to wrap their arms around this formidable opponent, society tried to wrap its collective head around the alternative universe it now confronted. Businesses and industries shut down and people were driven into their homes, quarantined until further notice.
The legal hiring market plummeted in a blink of an eye. What was once a smorgasbord of opportunities for candidates now became crumbs. Some execs pulled their open reqs permanently, while others pressed pause until the path forward was better known. Many employers with interview processes close to the finish line, rushed to completion while others “slow-rolled” their hiring. The most stagnant legal hiring period occurred between March and June. There were also layoffs, mainly in the hardest hit industries (hospitality, transportation and retail) and hobbling startups. But over the last 12 weeks, hiring has increasingly picked up in startup and public companies, indicating a glimmer of light at the end of the tunnel.
So how has this pandemic and its economic aftermath impacted compensation?
The rapid compensation escalation the legal profession had enjoyed in the prior 2 ½ years has flattened. However, for the most part, compensation – including base salary, target bonus and stock grants for in house lawyers – at all levels – has been holding steady.
Employers remain competitive for top talent – and while selectivity has increased, they are extending strong, but reasonable offers when The One finally comes along. Candidates continue to heavily negotiate offers and employers are responding by demonstrating some flexibility in one or more components of an offer. They are also successfully utilizing signing bonuses as a way to sweeten the pot and close the deal.
The pandemic has also forced a global work-from-home culture, with employer realization that being in the office is not mandatory in order to be productive, efficient or successful. Even the staunchest in-office advocates have softened their stance. Consequently, a growing number of employers are more amenable to hiring candidates in other, lower cost geographic markets – and are in fact, doing so. This micro geo-market hiring trend has impacted compensation – lowering it by 10%-20% for roles historically housed in higher cost of living markets. Whether this trend will continue remains to be seen, but I think it will.
Some employers have viewed the pandemic as an opportunity to test the waters by offering lower than average compensation ranges. But with higher legacy compensation and increased hiring activity (i.e. competition), employers offering “less attractive” compensation packages are encountering challenges including a much smaller viable candidate pool, rejected offers and searches that last for an eternity.
As we head into Chapter 2 of the pandemic, it appears that we will remain on Mr. Toad’s Wild Ride for just a wee bit longer. If the current market trends hold, demand for in house lawyers will continue to increase…slowly, but surely. The extent to which this will impact future in house compensation will depend on (1) geographic location for hiring; (2) the quality and quantity of the candidate pool; and (3) and number of suitors vying for legal talent. Early indications suggest in house compensation will weather the storm and could start increasing if hiring activity continues to climb. However, unpredictability still looms and a sudden collapse of the U.S. and global markets would undoubtedly throw a wrench into progress made.
Time will tell. But for now, buckle up, hold on tight and close your eyes as 2020 takes a few more trips around the rollercoaster. 2021 is just around the corner, so this crazy ride will all be over soon…hopefully.