Lawyer Pay

In-House Pay Hikes Tamped Down in Legal Cost-Cutting Efforts

Corporate legal departments are intent on cutting costs and are using a variety of strategies to get the job done, a new survey finds.

Lauren Chung, director of the Hildebrandt survey, told the ABA Journal that the frugal approach extends to compensation for in-house lawyers.

“Do I think that lawyers overall are making less?” Chung said. “They’re not getting the increases that they had been enjoying for the past several years. Every year they were almost guaranteed an increase. This year we see very clearly that is not the norm anymore.”

The average total cash compensation—base salary plus cash bonuses—was $229,000 for in-house lawyers in March 2009, down from $236,000 reported in a March 2008 survey. The apparent drop in year-over-year numbers could be misleading, however, because additional companies responded to this year’s survey.

When Hildebrandt asked companies responding to the 2009 survey to report total cash compensation numbers for March 2008 and 2009, they reported a year-over-year increase of 3 percent. Last year’s survey reported a year-over-year increase of 8 percent in total cash compensation.

Total compensation—base salary, cash bonus, and value of long-term incentives—was $285,000 in March 2009, an average increase of 4 percent. Last year responding companies reported a 10 percent increase in total compensation for in-house lawyers.

Jonathan Bellis, head of Hildebrandt’s law department consulting practice, told the Legal Intelligencer that the March 2009 survey showed there was no single method for cutting costs in corporate legal departments.

The Intelligencer reports that Bellis’ clients “have been looking at reducing discretionary budgets, limiting attendance at events, a shift in compensation structures, an increase in contract and temporary attorneys, the use of more regional law firms and shifting more work back to the business side of the company.”

The survey received 231 responses representing 21 industries and 22 percent of the Fortune 500 list. The Intelligencer and a Hildebrandt press release reported these findings:

• Eighteen percent of the respondents anticipated a decrease in the number of in-house lawyers in their departments, while 30 percent expected an increase. The numbers reflect a cost-reduction strategy of bringing more work inside that had been done by outside counsel, according to the press release.

• Nearly a third of the respondents expect to use fewer outside firms in the United States. Only 8 percent expect to increase the number of law firms they use.

• Forty-six percent of the responding companies anticipate that alternative billing arrangements will make up more than 11 percent of their outside legal budget, compared to 33 percent last year.

• Total legal spending increased by 5 percent in the United States, the same rate of increase as the year before.

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