LM Extras May 4, 2022

Inflation Busting: Retooling the Compensation Machine

Current forces threaten to upend the legal industry's recent run of moderate pay increases.

Inflation is here to stay. Law firms are entering a more challenging operating environment with annualized cost increases of some 7% — the fastest pace in 40 years and significantly higher than the 1.8% average of the past decade. Left unaddressed, inflation’s effects can damage the bottom line.

Phillip M. Perry

Perhaps the most important step the legal industry can take is to retool the compensation machine. Salaries, after all, are a particularly costly line item at most law firms. It follows that recalibrating their dynamics can be an especially effective technique for preserving profitability.

Putting a cap on salaries, though, will be easier said than done. A good number of people in the legal space, according to a new survey from consulting firm Robert Half, are looking for pay raises over the coming months and are more willing than ever to jump ship for better deals. 

“It seems that professionals in the legal market are especially open to looking for other opportunities if they are not being compensated appropriately,” says Jamy Sullivan, Executive Director for Global Talent Solutions at Robert Half.


These key findings from the Robert Half survey seem to reflect a basic discontent among the workforce:

  • 32% of legal professionals say they have not had a raise in the last 12 months.
  • 15% report they did but were disappointed with the amount.
  • 59% plan to ask for a raise this year. 
  •  Of those, 29% are ready to look for a new job in the absence of a raise.

Several forces seem to be driving a desire for higher compensation. Inflation, of course, is one reason, with 24% of respondents citing the need to compensate for a rise in the cost of living. Pay transparency is another, as roughly the same portion of respondents cite a desire to align compensation with current market rates. Even more people, though, express a desire to be compensated for heavier workloads. 

“It seems that professionals in the legal market are especially open to looking for other opportunities if they are not being compensated appropriately.”

“Some 29% of legal individuals said their job responsibilities had increased of the past year,” says Sullivan. “That is higher than the 22% for all industries lumped together.”

Combined, these forces threaten to end the legal industry’s recent run of moderate pay raises. In ALA’s 2021 Compensation and Benefit Survey, the great majority of law firm positions had received base salary increases ranging from 2% to 3% over the previous year, while compensation for associate attorneys with more than two years’ experience had increased by 3%.


The legal industry wanderlust comes at a particularly difficult time in terms of the candidate market, the tightness of which is putting upward pressure on starting salaries. “Unemployment for legal professionals in general is running at below 2%, and for attorneys 0.8%, which is incredibly low,” says Sullivan. That will make it tougher to replace any disappearing “A” players.

Particular attention is being paid to increases in associate compensation, and the past year has seen numerous attempts by law firms to match or exceed what the competition is offering. Sullivan expects no letup in this area. “We have seen a talent war in the associate space every single year, with big law firms trying to match or outbid each other, especially around the fourth quarter and into the first quarter.”

What can law firms do to moderate inflation’s effect on salary levels? There are other levers in the compensation machine besides pay raises. Firms can look into the viability of nonmonetary perks such as work-life balance, employee wellness, remote work arrangements, flexible scheduling, partnership tracks and expanded management duties. 

An early start in retooling compensation dynamics is probably a good idea, as Sullivan expects the market to remain challenging for the foreseeable future. “Law firms that want to keep their best people and attract new ones need to look at what they're offering in terms of salary and benefits as an overall package that aligns with what’s going on in the market.”

See how your firm compensation stacks up to other firms by contributing to ALA’s 2022 Compensation and Benefits Survey and its companion, the 2022 Large Firm Key Staff Compensation Survey. Both are now open for participation. Your feedback enhances the report that provides comprehensive information on law firm salaries, benefits, staffing ratios and turnover. Visit alanet.org/compsurvey for complete details.