Morrison on Metrics: Differences in Legal Department Pay

Metrics on lawyer compensation are important as guides to whether in-house lawyers are appropriately paid in terms of market prices. Those same metrics also give us insights into comparative benchmark metrics between countries. Let me offer an example or two of the spillover.

The latest global survey of compensation by the executive search firm Laurence Simons provides data on in-house lawyer compensation for 18 countries as well as two regions (North America and Middle East). Based on pay data from more than 1,900 inside lawyers, we can see differences of pay by level across countries.

For example, in the U.K., lawyers who are 12-13 years post qualification (roughly 14 years out of law school as an equivalent to U.S. lawyers) reported a median salary of $159,120 (EUR110,500 at $1.44 U.S. to the Euro); those at 16-20 years post qualification increased to $188,640 (EUR131,000). In Germany, the comparable figures were $151,200 (EUR105,000) and $208,800 (EUR145,000). Fairly close, the two countries are, with the average of the figures in each country favoring German lawyers by about 4 percent.

Across the Atlantic, the North American figures were $220,700 and $300,000--a whopping 45 percent higher than the German average.

We should not take these figures, aggregated and calculated, as precise, but it seems safe to say that lawyers in legal departments in the U.S., which probably make up nearly all of the North American region, cost much more than their counterparts with comparable experience in U.K. and German law departments.

Now, bear in mind that of total legal costs, those incurred by the inside legal department on its own expenditures (that is, excluding amounts paid external counsel and vendors) typically account for about 40 percent of the total. Of that portion, something like 75 percent goes to salaries, bonuses and benefits of all the members of the department, both lawyers and non-lawyers. The difference discussed above pertains only to salaries, but still they are significantly higher.

Thus, if we look at companies with the same revenue and their total legal spending as a percentage of that revenue, lawyer salaries bulk much larger on the western side of the Atlantic than on the eastern side. All things being equal, the spend-to-revenue ratio here should be higher than there, and indeed in the General Counsel Metrics global survey, the U.S. has the higher ratio, by about 25 percent. One might predict from the cost disparity something else: There will be fewer lawyers per billion dollars of revenue in the U.S. than in the U.K. and Germany. Sure enough, U.S. law departments have somewhat fewer lawyers than U.K. law departments and significantly fewer than the law departments in Germany. All things being equal, internal costs per lawyer would reflect both of these findings and would be higher in the U.S. They do and are.

In short, when you marry metrics about in-house lawyer compensation to metrics about total legal costs and ratios, differences between at least these countries show consistent patterns that make sense.

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Rees Morrison

Rees Morrison, Esq. is the founder of General Counsel Metrics, LLC. Based in Princeton, NJ, Rees has for the past 25 years consulted solely to...

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