Top law firms – including Cravath Swaine and Moore, Milbank LLP, and Davis Polk and Wardwell – have all significantly increased their associates’ salaries over course of the last year. A pay war between these firms has been afoot since January of 2021, as each has sought to pay its associates more in response to rising salaries at competing firms. Cravath leads the race, currently offering $415,000 in annual compensation to its most senior associates.
Millbank started this elite firm salary war when it increased pay for first year associates to $215,000 per year. Millbank’s second-, third-, and fourth-year associates received a $10,000 per year salary bump. Salaries for midlevel and senior associates reached $385,000 per year, which then set a salary precedent in the industry. Davis Polk responded by not only meeting Milbank’s pay scale for second- through eighth-year associates, but also increasing its pay 3% from those levels. Cravath then announced it would pay out even more to mid- and senior-level associates, with its compensation peaking at the aforementioned $415,000 figure.
These firms ratcheted up their associates’ pay in an effort to attract and maintain top talent in the industry, but some are now seeing expenses grow faster than revenue. Increased salary and bonus pay has resulted in an increase of 12% in direct expenses for these major firms, which has been the highest surge since the 2008 financial crisis, according to Reuters. When the economy softens, this pay war will likely cool off.
This pay war has exposed and further widened a rift between elite firms and all others. Many firms have not had the resources to partake in this war, and they saw some of their top talent poached as a result.
Neither the widening rift nor expense growth seems to be enough to bring this race to a halt. In recent internal memos, Debevoise and Plimpton and Latham and Watkins said they will not only match Cravath’s senior pay rate but will add an extra pay tier of $425,000 for their ninth-year associates. The Chairman of McDermott Will & Emery, another firm that will match Cravath’s pay scale, said in a recent internal memo that while these raises may seem dramatic, they underscore the value that associates currently bring to the table.