(Reuters) – Law firms noticed elevated demand, charges and productiveness within the third quarter of 2021, but associate compensation hikes dragged on their backside strains, a new report stated Monday.
The most recent Thomson Reuters Peer Monitor Index, which tracks financial indicators at massive and midsized regulation firms, discovered direct bills grew greater than 7% over the previous 12 months, fueled largely by associate raises and bonuses.
Many massive firms elevated beginning associate salaries from $190,000 to $205,000 this summer season and have doled out big bonuses in a bid to recruit and retain attorneys. Associate compensation is up practically 10% year-over-year, based on Peer Monitor, which is a part of the identical guardian firm as Reuters.
“How much of a drag direct expenses will be — that’s really going to be a question of how long firms perpetuate this idea of constantly increasing salaries,” stated William Josten, supervisor for enterprise authorized content material on the Thomson Reuters Institute.
Direct bills will maintain trending up a minimum of by way of the following two quarters as a consequence of latest pay will increase, he stated, although robust development in charges and collections will possible maintain firms worthwhile in 2021. The long-term affect of elevated associate compensation is much less clear, Josten cautioned.
Larger pay hasn’t slowed lawyer turnover. Almost 14% of attorneys on the firms tracked by Peer Monitor left throughout the previous 12 months, which is barely greater turnover than the third quarter of 2019 — the final earlier than the COVID-19 pandemic. Roughly 400 extra attorneys left Peer Monitor Index firms in 2021 than is typical.
“Competition for talent — as indicated by increasing direct expense growth — may have ignited in Q3 2021, but the situation may be only just starting to approach the boiling point,” the report stated.
Nonetheless, there’s loads of excellent news for firms. Demand rose 4.4% from the final quarter. Productiveness and charges had been up 1.9% and three.7%, respectively. Third-quarter demand surpassed that of pre-pandemic occasions.
Almost each apply space tracked by Peer Monitor noticed demand development. Actual property led the pack with a 13.2% enhance over the earlier yr. Mergers and acquisitions was up 9.2%, adopted by all company work at 8.7%, tax at 4.1%, and labor and employment at 3.2%.
Litigation demand was up 2.9% over a yr in the past, but nonetheless hasn’t recovered to pre-pandemic ranges. Mental property was down .3% in comparison with a yr in the past, whereas chapter was down 12.2%, the report discovered.
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