Q1 Overview
Although lateral hiring increased during Q1, it was perhaps not to the extent that some may have predicted. In January, we saw a significant increase in firm entrances, but this is typically the case in most years, as attorneys often accept offers in Q4 before starting at their new firm in the new year. Despite this, it is likely that there will still be an increase in hiring over the coming weeks, as a result of end-of-year bonuses still being paid out by a number of firms in March.
A point of note this quarter was that we have not yet seen a full return to transactional hiring. While this is not necessarily a huge surprise, a little more growth in this area seemed likely, based on sentiments from leaders of those practice groups. Nevertheless, we are now seeing ‘green shoots’ across M&A, private equity, leveraged finance, and private funds.
One key trend that did emerge during Q1 was a return to junior associate recruitment. This significantly decreased in 2023, after very busy periods for junior lateral hiring during the previous two years. We are now seeing an increase in client mandates for associates at the first to fourth year; however, this does not mean that the demand for mid-senior level associate hiring has slowed down, rather that demand is now across the entire associate ‘ladder’. This is a very different picture from that of Q1-Q3 2023, which was much more focused on mid-senior level hiring.
Overall, hiring activity can be said to be improving after a somewhat turbulent 2023. Lateral hiring is certainly increasing across the market, albeit tentatively. Having said this, with some remaining market uncertainty, many firms are wary of hiring too quickly after the frenetic activity of 2021 and 2022 leading to some over-hiring across the market.
Hiring Activity
With regard to the types of firms undertaking the most hiring activity, a return to AmLaw50 hiring has continued where it left off in Q4 of last year. After a notable drop-off in recruitment, particularly in transactional spaces, during the first half of 2023 (compared to 2021 and 2022), we are now seeing this segment make a positive return to ‘growth’ hiring. Although this is nothing like the very high numbers of recent years, it is certainly back to an encouraging place.
In terms of practice areas, interestingly, litigation is continuing its strong hiring run from 2023. With plenty of market volatility throughout last year, we saw a spike in demand for counter-cyclical practice groups, such as commercial litigation, restructuring/bankruptcy, and employment. Restructuring and litigation remain active, owing to a combination of increased financing costs and remaining uncertainty in the market keeping these spaces active. IP litigation also continues to be busy but undoubtedly no longer at the levels of Q2 and Q3 of last year.
In-Demand Skill Sets and Roles
Partner lateral hiring has remained very buoyant, particularly partners who can bring a handful of other business-generators and associates with them, creating a ‘team move’ scenario. This appears to be a trend that is here to stay: ‘clusters’ of partners being purchased by firms to expand their geographic reach and services, as clients continue to look for that ‘all-in-one’ offering from their law firm of choice. On the associate side, strong mid-levels also continued to be highly desirable, especially in contentious practice areas. For example, restructuring has been exceptionally busy during Q1, and mid-level lawyers at the AmLaw50 end of the market have perhaps been in the most demand, again alongside strong commercial litigators.
In terms of talent shortages, the most difficult-to-source candidates were restructuring/bankruptcy associates at the top end of the market (AmLaw50 firms). Interestingly, a lot of the scarcity we saw was based around geography. For example, more elite firms have started to expand outside of the traditionally core markets where their HQs are based or where they have established a strong presence over the last few decades (New York, Washington DC, Chicago, Los Angeles, San Francisco, etc.). As a result, they are now looking to hire high top-level attorneys from smaller talent pools, therefore a tighter supply.
A good example of this can be seen in the Houston market. Here, corporate hiring is often driven by the energy/oil & gas sector, which has become much busier in recent years. Bigger firms are now looking to expand their associate ranks in transactional areas but of course, there are far fewer available candidates in those talent pools than in New York, for example. This further widens the gap between supply and demand.
Salary Levels
We saw another increase to the top market associate scale, which took effect from 1st January this year for most firms matching it. First-year associates joining firms at the top end of the market can now attract a $225k base salary plus a $20k bonus. Fourth-year associates can attain a $310k base salary and $75k bonus, while eighth-year associates at the top end of the scale now command a $435k base salary and an additional $115k bonus. To put these changes into context, over the last three years, this has increased between 19% (first year) and 25% (eighth year), excluding any special bonuses.
Junior and mid-level partner compensation also grew on average across the quarter. Some of these were ‘blanket’ increases for firms still adhering to a ‘lockstep’ compensation model, and some were individual increases driven by increasing books and practice area demand. Naturally, there is much more variation in the numbers in the partner space, making it difficult to attach an accurate market-wide percentage or figure to this, but there is certainly an upwards trajectory.
Forecast for Q2
It is anticipated that the remaining ‘pending’ lateral entrances will happen by the end of March, after the 2023 end-of-year bonuses have been collected. Following this, we are likely to see the start of an increase in general recruitment levels of larger full-service firms. While litigation and counter-cyclical practice area hiring appears to be here to stay, at least for a little while, we are now seeing a return to some transactional recruitment as well. Based on conversations with a number of firm leaders, this seems set to continue in Q2, particularly in the areas of M&A, private equity, leverage finance, and investment funds. This combination of transactional and contentious hiring in parallel is predicted to lead to a general increase throughout Q2 and for the remainder of 2024.
Restructuring/bankruptcy will almost certainly remain in high demand during Q2, alongside a continued market-wide push on top-level commercial litigators. We may well start to see more placements being made across M&A and finance, particularly across AmLaw50 firms.
While mid-market firms had a strong year in 2023, lateral hiring reduced across top firms last year because of a significant drop-off in transactional workflows. In parallel to this, after two years of extremely high billing hours and lack of work-life balance, many associates from elite groups started to look for a different firm environment. As a result, many middle-market firms benefited last year, as they scooped up top talent from the elite end of the market with their less hours-intensive environments. In addition, as companies and clients looked to reduce their overall spending on legal services as the market became slower and more uncertain during 2023, middle-market firms picked up a lot of new work.
Now, however, the picture seems to be readjusting to the pre-2023 environment. Although not too dramatically or quickly, we are certainly seeing a shift back towards AmLaw50 firms undertaking more hiring on account of ‘green shoots’ for transactional workflow. This is a trend that is likely to continue during Q2. Salaries are anticipated to remain the same, after a recent rise to the top market scale. However, we have certainly witnessed plenty of surprises over the last two to three years, so it is not out of the question that a big name could announce another increase.
In terms of challenges for candidates, the biggest potential obstacle is ‘opportunity cost.’ With the hiring market starting to become more active, people will have to weigh up the benefits of what could be an improving situation at their own firm against more enticing opportunities when entering the market. As better options become available and the attractiveness of offers develops, decisions will become more difficult.
For employers, the greatest challenge is likely to be one of simple supply and demand, as the number of open roles per available candidate or attorney is increasing quickly. This ratio has always been high in the elite attorney market, but it was lower than usual in a slower hiring environment last year. Now it is returning to normal levels and, as a result, employers need to be prepared to compete with other firms for the same candidates.
In short, lateral hiring is set to increase and improve during Q2, but this time more gradually as some market volatility and uncertainty remains. The good news is that market conditions are certainly improving.
[/fusion_text][fusion_text columns=”1″ animation_direction=”left” animation_speed=”0.3″ animation_delay=”0″ hide_on_mobile=”small-visibility,medium-visibility” sticky_display=”normal,sticky” column_spacing=”150″]Q1 Overview
Although lateral hiring increased during Q1, it was perhaps not to the extent that some may have predicted. In January, we saw a significant increase in firm entrances, but this is typically the case in most years, as attorneys often accept offers in Q4 before starting at their new firm in the new year. Despite this, it is likely that there will still be an increase in hiring over the coming weeks, as a result of end-of-year bonuses still being paid out by a number of firms in March.
A point of note this quarter was that we have not yet seen a full return to transactional hiring. While this is not necessarily a huge surprise, a little more growth in this area seemed likely, based on sentiments from leaders of those practice groups. Nevertheless, we are now seeing ‘green shoots’ across M&A, private equity, leveraged finance, and private funds.
One key trend that did emerge during Q1 was a return to junior associate recruitment. This significantly decreased in 2023, after very busy periods for junior lateral hiring during the previous two years. We are now seeing an increase in client mandates for associates at the first to fourth year; however, this does not mean that the demand for mid-senior level associate hiring has slowed down, rather that demand is now across the entire associate ‘ladder’. This is a very different picture from that of Q1-Q3 2023, which was much more focused on mid-senior level hiring.
Overall, hiring activity can be said to be improving after a somewhat turbulent 2023. Lateral hiring is certainly increasing across the market, albeit tentatively. Having said this, with some remaining market uncertainty, many firms are wary of hiring too quickly after the frenetic activity of 2021 and 2022 leading to some over-hiring across the market.
Hiring Activity
With regard to the types of firms undertaking the most hiring activity, a return to AmLaw50 hiring has continued where it left off in Q4 of last year. After a notable drop-off in recruitment, particularly in transactional spaces, during the first half of 2023 (compared to 2021 and 2022), we are now seeing this segment make a positive return to ‘growth’ hiring. Although this is nothing like the very high numbers of recent years, it is certainly back to an encouraging place.
In terms of practice areas, interestingly, litigation is continuing its strong hiring run from 2023. With plenty of market volatility throughout last year, we saw a spike in demand for counter-cyclical practice groups, such as commercial litigation, restructuring/bankruptcy, and employment. Restructuring and litigation remain active, owing to a combination of increased financing costs and remaining uncertainty in the market keeping these spaces active. IP litigation also continues to be busy but undoubtedly no longer at the levels of Q2 and Q3 of last year.
In-Demand Skill Sets and Roles
Partner lateral hiring has remained very buoyant, particularly partners who can bring a handful of other business-generators and associates with them, creating a ‘team move’ scenario. This appears to be a trend that is here to stay: ‘clusters’ of partners being purchased by firms to expand their geographic reach and services, as clients continue to look for that ‘all-in-one’ offering from their law firm of choice. On the associate side, strong mid-levels also continued to be highly desirable, especially in contentious practice areas. For example, restructuring has been exceptionally busy during Q1, and mid-level lawyers at the AmLaw50 end of the market have perhaps been in the most demand, again alongside strong commercial litigators.
In terms of talent shortages, the most difficult-to-source candidates were restructuring/bankruptcy associates at the top end of the market (AmLaw50 firms). Interestingly, a lot of the scarcity we saw was based around geography. For example, more elite firms have started to expand outside of the traditionally core markets where their HQs are based or where they have established a strong presence over the last few decades (New York, Washington DC, Chicago, Los Angeles, San Francisco, etc.). As a result, they are now looking to hire high top-level attorneys from smaller talent pools, therefore a tighter supply.
A good example of this can be seen in the Houston market. Here, corporate hiring is often driven by the energy/oil & gas sector, which has become much busier in recent years. Bigger firms are now looking to expand their associate ranks in transactional areas but of course, there are far fewer available candidates in those talent pools than in New York, for example. This further widens the gap between supply and demand.
Salary Levels
We saw another increase to the top market associate scale, which took effect from 1st January this year for most firms matching it. First-year associates joining firms at the top end of the market can now attract a $225k base salary plus a $20k bonus. Fourth-year associates can attain a $310k base salary and $75k bonus, while eighth-year associates at the top end of the scale now command a $435k base salary and an additional $115k bonus. To put these changes into context, over the last three years, this has increased between 19% (first year) and 25% (eighth year), excluding any special bonuses.
Junior and mid-level partner compensation also grew on average across the quarter. Some of these were ‘blanket’ increases for firms still adhering to a ‘lockstep’ compensation model, and some were individual increases driven by increasing books and practice area demand. Naturally, there is much more variation in the numbers in the partner space, making it difficult to attach an accurate market-wide percentage or figure to this, but there is certainly an upwards trajectory.
Forecast for Q2
It is anticipated that the remaining ‘pending’ lateral entrances will happen by the end of March, after the 2023 end-of-year bonuses have been collected. Following this, we are likely to see the start of an increase in general recruitment levels of larger full-service firms. While litigation and counter-cyclical practice area hiring appears to be here to stay, at least for a little while, we are now seeing a return to some transactional recruitment as well. Based on conversations with a number of firm leaders, this seems set to continue in Q2, particularly in the areas of M&A, private equity, leverage finance, and investment funds. This combination of transactional and contentious hiring in parallel is predicted to lead to a general increase throughout Q2 and for the remainder of 2024.
Restructuring/bankruptcy will almost certainly remain in high demand during Q2, alongside a continued market-wide push on top-level commercial litigators. We may well start to see more placements being made across M&A and finance, particularly across AmLaw50 firms.
While mid-market firms had a strong year in 2023, lateral hiring reduced across top firms last year because of a significant drop-off in transactional workflows. In parallel to this, after two years of extremely high billing hours and lack of work-life balance, many associates from elite groups started to look for a different firm environment. As a result, many middle-market firms benefited last year, as they scooped up top talent from the elite end of the market with their less hours-intensive environments. In addition, as companies and clients looked to reduce their overall spending on legal services as the market became slower and more uncertain during 2023, middle-market firms picked up a lot of new work.
Now, however, the picture seems to be readjusting to the pre-2023 environment. Although not too dramatically or quickly, we are certainly seeing a shift back towards AmLaw50 firms undertaking more hiring on account of ‘green shoots’ for transactional workflow. This is a trend that is likely to continue during Q2. Salaries are anticipated to remain the same, after a recent rise to the top market scale. However, we have certainly witnessed plenty of surprises over the last two to three years, so it is not out of the question that a big name could announce another increase.
In terms of challenges for candidates, the biggest potential obstacle is ‘opportunity cost.’ With the hiring market starting to become more active, people will have to weigh up the benefits of what could be an improving situation at their own firm against more enticing opportunities when entering the market. As better options become available and the attractiveness of offers develops, decisions will become more difficult.
For employers, the greatest challenge is likely to be one of simple supply and demand, as the number of open roles per available candidate or attorney is increasing quickly. This ratio has always been high in the elite attorney market, but it was lower than usual in a slower hiring environment last year. Now it is returning to normal levels and, as a result, employers need to be prepared to compete with other firms for the same candidates.
In short, lateral hiring is set to increase and improve during Q2, but this time more gradually as some market volatility and uncertainty remains. The good news is that market conditions are certainly improving.
[/fusion_text][fusion_text animation_direction=”left” animation_speed=”0.3″ animation_delay=”0″ hide_on_mobile=”large-visibility” sticky_display=”normal,sticky”]Salaries
| Role New York, DC, San Fran: The Elite (AmLaw 100) |
Private Practice – US Firm Permanent Salary Per Annum US$ Range (Base Salary) |
|---|---|
| Partner (Equity) | 1.4m (average total comp) |
| Counsel / Salaried Partner | 400 – 550k |
| 8th year | 365 – 415k |
| 7th year | 350 – 400k |
| 6th year | 330 – 370k |
| 5th year | 305 – 345k |
| 4th year | 275 – 295k |
| 3rd year | 240 – 250k |
| 2nd year | 215 – 225k |
| 1st year | 205 – 215k |
| New York: Mid Market (AmLaw 100 -200) |
Private Practice – US Firm Permanent Salary Per Annum US$ Range (Base Salary) |
|---|---|
| Partner (Equity) | 800k (average total comp) |
| Counsel / Salaried Partner | 315 – 450k |
| 8th year | 300 – 415k |
| 7th year | 275 – 400k |
| 6th year | 255 – 370k |
| 5th year | 240 – 345k |
| 4th year | 225 – 295k |
| 3rd year | 200 – 250k |
| 2nd year | 180 – 225k |
| 1st year | 150 – 215k |