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Big Law Starting Salaries in the US are starting to increase


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  • Law Student

https://www.law.com/americanlawyer/2021/06/10/milbank-raises-associate-salaries-globally-bumping-up-starting-pay-to-200k/?slreturn=20210510221804

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Milkbank Raises Starting Associate Salary to $200K Globally

Amid one of the most competitive associate markets in recent memory, Milbank is raising associate salaries in all of its offices, bumping up associate pay by $10,000 or $15,000.

First-year associates will receive $10,000 pay increases, bumping up starting salary to $200,000, while fourth-year associates and above will receive $15,000 pay increases, with senior associates going up to $355,000, said firm chair Scott Edelman in an interview Thursday. Associates and most counsel will receive pay raises in all offices, the firm said.

 

This same law firm was the one who initiated the previous increase in the starting salary for BigLaw in the US. This increase will eventually be matched at other competing firms in America. Biglawinvestor.com has already updated its pay scale to reflect this change. I just wanted to share this interesting piece of news because I know some of you are considering big law in the states. 

In comparison, Canadian big law salaries overall remain stagnant.

(sorry if this is in the wrong topic, I didn't know if this would be under Law or simply General)

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QueensGrad
  • Lawyer

I think the Toronto firms will have to make some kind of move because there is just too much talent drain to the US right now (especially for upper year associates). You make approximately double as a first year now in the US (200k USD = $240K CAD), and do not have to article (where you both make less and only get paid for 8-10 months out of a year). Add to that pressure, from what I have seen the gap between in-house salaries and Bay St salaries even in Canada is also getting pretty small if you join the right kind of company. Also add to the mix that the raise from $100k to $110k a while ago for first years was basically not a raise since the $100k starting salary (which I understand was instituted prior to 2007) should be at $125K today if you account only for inflation (and not rising firm profits) since 2007. Check out this article for more: Bay Street associates get their first pay raise in a decade (2018).

Also based on what I have heard from friends in NYC, at the end of the day those associates do not work significantly more hours than Toronto associates (especially in litigation). Recall also that most NY firms have lockstep bonuses, whereas most Bay St firms have hours-based bonuses. 

However, I think it is important to note that these US firms have profits per equity partner (PEP) in the millions (highest I have seen is $6M), and in some cases saw PEP go up by hundreds of thousands of dollars since March 2020. Based on available data (i.e. from Gowling and Cassels), my feeling is Canadian law firms probably have much much lower PEP (I would guess the highest average in Canada could be around $1M, but I really do not know for sure) and therefore much lower capacity to absorb higher associate costs. For example, to generate $6M in fees (not even profit), a lawyer working 3,000 hours a year would have to bill at $2,000 an hour, which is absurd. I have never seen an hourly rate above $1,000 on Bay St but others may have more insight into this. I think those NYC firms must be taking a lot of percentage-based fees on deals (i.e. 0.1% on a $10B deal) to be able to generate such high PEP. I haven't seen a lot of % based fee structures on Bay St but others would have more insight into this than me as I only got exposure to this when I rotated through M&A during articling. In any event, given the significantly smaller deal flow in Canada, even percentage based fees would probably not allow a firm to generate PEP at US levels. I am really not an expert on this though and would love to hear the thoughts of others. 

I have also been told that Bay St firms lose money on their associates for at least the first year. 

Edited by QueensGrad
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Jaggers
1 hour ago, QueensGrad said:

Also add to the mix that the raise from $100k to $110k a while ago for first years was basically not a raise since the $100k starting salary (which I understand was instituted prior to 2007) should be at $125K today if you account only for inflation (and not rising firm profits) since 2007. Check out this article for more: Bay Street associates get their first pay raise in a decade (2018).

I get that inflation is not necessarily directly related to wages, but I started just after first year salaries went up to $100K. At that time, you could buy a two bedroom place in the Annex for $400K or rent one for $1900. Since then salaries have gone up by 10% but I sold that $400K place for $750K (probably $850 or more now). The Bay St deal is not nearly as good as it used to be, though that's true of almost every job in Toronto over the last two decades.

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chicken
3 hours ago, QueensGrad said:

I think the Toronto firms will have to make some kind of move because there is just too much talent drain to the US right now (especially for upper year associates). You make approximately double as a first year now in the US (200k USD = $240K CAD), and do not have to article (where you both make less and only get paid for 8-10 months out of a year). Add to that pressure, from what I have seen the gap between in-house salaries and Bay St salaries even in Canada is also getting pretty small if you join the right kind of company. Also add to the mix that the raise from $100k to $110k a while ago for first years was basically not a raise since the $100k starting salary (which I understand was instituted prior to 2007) should be at $125K today if you account only for inflation (and not rising firm profits) since 2007. Check out this article for more: Bay Street associates get their first pay raise in a decade (2018).

Also based on what I have heard from friends in NYC, at the end of the day those associates do not work significantly more hours than Toronto associates (especially in litigation). Recall also that most NY firms have lockstep bonuses, whereas most Bay St firms have hours-based bonuses. 

However, I think it is important to note that these US firms have profits per equity partner (PEP) in the millions (highest I have seen is $6M), and in some cases saw PEP go up by hundreds of thousands of dollars since March 2020. Based on available data (i.e. from Gowling and Cassels), my feeling is Canadian law firms probably have much much lower PEP (I would guess the highest average in Canada could be around $1M, but I really do not know for sure) and therefore much lower capacity to absorb higher associate costs. For example, to generate $6M in fees (not even profit), a lawyer working 3,000 hours a year would have to bill at $2,000 an hour, which is absurd. I have never seen an hourly rate above $1,000 on Bay St but others may have more insight into this. I think those NYC firms must be taking a lot of percentage-based fees on deals (i.e. 0.1% on a $10B deal) to be able to generate such high PEP. I haven't seen a lot of % based fee structures on Bay St but others would have more insight into this than me as I only got exposure to this when I rotated through M&A during articling. In any event, given the significantly smaller deal flow in Canada, even percentage based fees would probably not allow a firm to generate PEP at US levels. I am really not an expert on this though and would love to hear the thoughts of others. 

I have also been told that Bay St firms lose money on their associates for at least the first year. 

Top partners on Bay st bill more than 1k per hour. I’ve seen $1200+ per hour, but these lawyers are all highly regarded and were called to the bar 20+ years ago.

A raise should really be in the works for associates. I do think we’ll potentially see one in time for 2022 calls. And if it doesn’t, larger bonuses should be in the works (which already has been happening). But the only annoying thing is there is no transparency re bonuses. They can vary significantly from firm to firm.

 

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QueensGrad
  • Lawyer
4 minutes ago, chicken said:

Top partners on Bay st bill more than 1k per hour. I’ve seen $1200+ per hour, but these lawyers are all highly regarded and were called to the bar 20+ years ago.

Thanks - this is good to know

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QueensGrad
  • Lawyer

Looks like Davis Polk is pushing the raises up slightly - e.g. $202,500 for first years. 

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Hitman9172
  • Lawyer

Looks like all the big US firms are starting to fall like dominoes for these recent raises. Hopefully this trickles north of the border soon.

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