Does Undermarket = Underpaid?
Let’s be frank. You work for a reason. Sometimes that reason might be as simple as money. It doesn’t mean you’re shallow or that you don’t care about the experience you’re getting or the culture of where you work. It’s more likely that you’re bogged down with student loans which you’re trying to pay off ahead of schedule. Maybe you have your eye on buying a house or apartment or sending your kids to nursery school or camp. Or perhaps it’s just because, coming out of law school, students were focused on getting the most prestigious and highest paying job. Regardless of the reason, your overall compensation significantly impacts the way in which you live your life and it’s likely to remain a critical factor as you manage your career path.
This emphasis on law firm compensation is understandable. November and December don’t just usher in the “holiday season,” they bring the “bonus season” as well – that much anticipated time of year when associates scour Above the Law eagerly awaiting news of announcements regarding “market bonus”. There’s lots of chatter about “making hours,” whether your firm is paying discretionary bonuses, and perhaps even rumors of increases in associate starting salary.
I’ve been recruiting for 12 years and it’s been my experience that the more seasoned you become, the more likely you are to look beyond the numbers and spend less time indulging in this type of chatter and more time thinking about the long game. You’ll start to focus on things like personal satisfaction, professional development opportunities and career trajectory. You’ll start asking yourself questions such as “Where is my best chance of making partner?” “How do I find a work life balance?” and “What’s the best route for going in-house?” And as you embark on that journey, you will come to realize that not all law firms are created equal. While the legal blogs are filled with information about “market compensation,” most firms don’t pay top of the market. At the majority of firms, base salaries are lower, often to the tune of 10% to 20% and sometimes more, and bonuses don’t resemble the numbers announced by the leading firms.
Does being “undermarket” mean you’re underpaid? Not necessarily. But to make that determination, you need to fully understand what you’re stepping into (and the tradeoffs you’re making) and the landscape of this new market that you’re in.
First off, firms that don’t pay top of the market do so because their internal economics don’t reflect top of the market. Their billing rates are lower which enables them to take on smaller matters or work with clients that the top firms aren’t vying for. This can translate into greater responsibility on your matters as deals are leanly staffed and firms are motivated to deploy more junior lawyers to keep down costs. It can also mean access to types of work or clients that you otherwise wouldn’t get exposure to at a larger firm. And for business minded associates, you may find that you’re able to attract your own clients with your lower rates. But it also means that they just can’t pay you what you made at an AmLaw 25 firm.
Hours expectations may also be different now that your overhead is lower. While there are always exceptions, many attorneys find that they are not logging in the same time as they did before. This may be due in part to the types of matters they handle and the reality that they don’t move on the same timeline as, say, representing a sponsor in a large acquisition finance. It’s also likely that your new colleagues place a higher premium on personal time, as they too may have opted to forego making top dollar. Another key distinction may be path to partnership, something that is elusive at top firms as economics incentivize them to limit the number of people who get promoted. Firms with different compensation models also have the flexibility to be more creative when it comes to promotion. While your overall compensation may not resemble what you’d expect at a top firm (perhaps only 1 comma, not 2), if your lifestyle can accommodate it, you may find that you’re still otherwise professionally fulfilled.
We are regularly asked about, and counsel candidates on making this type of move and most prove successful. But a key element to that long term success is having a clear picture of why this makes sense for you and owning the change of course that you’re embarking on.