Associate salaries aren’t going up. If anything, we’re in a deflationary period regarding pay.
But billing rates? Yeah, those are still going up. Just a little bit. The National Law Journal reports:
Law firms increased their average annual firmwide billing rate by 2.5 percent over the last year, one of the lowest increases in recent memory, according to The National Law Journal’s 2009 survey of billing rates.
The small 2009 boost compares to a 4.3 percent increase reported in 2008 and a 7.7 percent rate climb in 2007. “Law firms this year increased rates very modestly, compared to the standard rate increase of 6 to 8 percent,” said James Jones, a consultant with Hildebrandt International. “I would have expected to see that, in 2009, when the message [about the state of the economy] finally sunk in.”
See clients, law firms understand the difficult state of the economy. That’s why they are charging you just a little more — instead of a lot more.
I’m a little surprised that any firm increased rates. Clients seem surprised too:
Although growth was comparatively slow, most firms did raise their rates. The average firmwide billing rate grew at 76 percent of the firms that reported detailed billing information in both 2009 and 2008.
Susan Hackett, senior vice president and general counsel of the Association of Corporate Council, expressed surprise that any firm would boost rates right now. “I can tell you that whenever I talk to clients they actually laugh when they hear about firms raising rates in this environment,”
Hackett said via e-mail. “Every one of them should have been involved in some kind of cost-cutting or efficiency exercise, just like their clients, and the idea that the way to counter possible decreasing workloads or excess capacity is to raise prices is totally contrary to good business judgment.”
The rate increases (and internal cost cutting) are happening as firms try to keep profits high:
Firms’ inability to increase billing rates to the extent they have in years past is bound to depress 2009 financial results because rate increases have been the single biggest factor in recent revenue and profit gains, said Altman Weil consultant James Cotterman. The cost cutting firms did during the past year will help mitigate the lower-than-typical rate hikes but likely won’t be enough to offset those losses, he said. Firms also reported that they are generating a larger percentage of revenue from alternative billing arrangements, which have grown in popularity as legal departments have looked for ways to cut costs.
Revenue and profit per partner numbers are going to be really interesting this year. I can’t wait.
Firms’ Billing Rates Inched Up During 2009, NLJ Survey Shows [National Law Journal]