Salary Increases for First Year Associates Impact Other Lawyers' Take in 2005
Newtown Square, PA, August 8, 2006 — The newly released Altman Weil Survey of Law Firm Economics, 2006 edition reports profits per equity partner were up only 2.9% in 2005, while non-equity partners and associates realized compensation increases of 6.3% and 5.7% respectively.
“Equity partners funded the better-than-inflation increases for non-equity partners and associates in 2005.” notes Altman Weil principal James Cotterman. “The upward movement was fueled by rapid increases in starting salaries and bonuses to new graduates which pushed all other non-owner lawyer salaries up, although those other groups experienced compensation compression relative to first-year associates.”
The 2005 trend comparisons were drawn from a super-group of nearly 200 law firms that have participated in the survey over sequential years.
Law Firm Financials
The median profits per partner (defined as salary/draw, bonus/distribution in cash, plus benefits/distribution in kind) for law firm equity partners was $297,899 in 2005, a rise of 2.9%. Non-equity partners nationwide saw their total compensation increase by 6.3% to $187,000. Median associate compensation was reported at $118,475 up 5.7%.
Starting salary and bonus offers for new graduates in 2005 was a median $80,000. At larger law firms, in the 150+ category, new graduates received a median $95,625, and averaged $129,000 in the top decile.
Average revenue per lawyer in law firms nationwide was up 5.37% to $397,394 in 2005. Law firm expenses were up 3.9%, outpacing the 2005 inflation rate of 3.4%, and leaving per lawyer income up a respectable 6.4%.
Billing Rates
The median hourly billing rate for partners with 21 or more years of experience was $305/hour in 2005, a 7% increase over last year’s reported rate. Four-five year associates billed a median $195/hour, up 8.3% according to the Survey.
Billing rates varied significantly by firm size. Equity partners in law firms with over 150 lawyers had a median hourly rate of $350/hour, while averaging $500/hour in the top 10% of reporting firms. Associates in this firm size category billed $220/hour, up to $325/hour respectively.
Billable Hours
Billable hours for partners and associates were virtually unchanged from the prior year, according to the Survey. Partners with 21+ years in practice recorded a median 1,640 billable hours (down 1.7%), while four-five year associates recorded median billable hours per year of 1,939 (up 1.7%).
Partners with significant management responsibilities billed only about 10% fewer hours than their non-manager peers. Nationally, median billable hours for lawyer-managers were 1,477. At firms with over 150 lawyers, this group billed a median 1,548 hours.
Staffing Ratios
The average ratio of associates to partners in law firms nationwide was .67 in 2005, i.e., 67 associates for every 100 partners. In firms with over 150 lawyers, the ratio jumped to .82. The highest associate/partner ratios were reported in Intellectual Property practice where the ratio was 1.09 and Insurance Defense Litigation at .99.
The average paralegal/lawyer ratio is .26, marginally lower at larger firms (.23 at 150+ lawyer firms), and slightly higher at firms with 75 or fewer lawyers. Family Law and Plaintiffs’ Contingency Litigation practices report the highest use of paralegals, with .42 and .41 ratios respectively.
The Survey
The Survey of Law Firm Economics has been published annually since 1972 by Altman Weil Publications. The Survey reports on law firm revenues, expenses, billable hours, billing rates, compensation, leverage and more. It enables law firms to compare performance data with peer firms in similar size, geographic area and practice categories.
This year’s Survey contains information from 17,285 lawyers from 285 U.S. law firms, including 8,991 partners/shareholders, 6,988 associates, 967 active counsel and 339 staff lawyers. Data was collected in the spring of 2006 and reports 2005 performance. For additional information or to purchase a survey, go to www.altmanweil.com/SLFE.
About Altman Weil
Altman Weil Publications is a subsidiary of Altman Weil, Inc., a legal management consultancy headquartered in suburban Philadelphia. It conducts and publishes numerous surveys of the legal profession including the Law Department Compensation Benchmarking Survey, the Survey of Compensation Systems in Private Law Firms, and the Annual Paralegal Compensation Survey. For additional information visit our website at www.altmanweil.com.
Contact Information
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