About 10 years ago, the salaries of lawyers in large law firms developed rapidly. Accurate information on current salaries was almost impossible to obtain at that time because of the constant changes. Law firms were pursuing rapid growth and wanted to attract the top 5-10% of lawyers. Therefore, the top salary bracket of €100,000 fixed salary was quickly no longer taboo for entry-level lawyers. Possible bonus payments of up to 40% were used to effectively increase the fixed salary paid.

Salaries in crisis

But then came the crisis, which hit many law firms hard. The so-called "bread and butter" transaction business in particular dropped off abruptly at most firms. Many law firms reacted with immediate hiring freezes and salary freezes. Originally promised bonus payments could not be kept. This was followed by salary cuts for entry-level employees and, in some cases, even layoffs.

In 2010/2011, the situation eased again significantly. The seemingly more positive economic development in this country also reached the legal labor market, which always reacts to market developments with a slight time lag. Thus, law firms again benefited from this development and reported a significantly revived business. Not least, the increased demand for young junior lawyers reflected this development.

Increased demand & work-life balance

This also led to movements in salaries again. The freeze on salary increases was lifted in the law firms. In some cases, even omitted increases from previous years were made up for. Similarly, bonus payments have started to flow again, albeit to a lesser extent than before. Since that time, there has been steady growth in salaries. Whereas before the financial crisis only isolated law firms had exceeded the 100,000 euro mark, in 2015 this was standard practice at the renowned units. During 2016, many law firms made a further leap. Medium-sized units, national full-service law firms and boutiques have also now raised starting salaries into the six-figure range. At the top, you'll find some U.S. units at 140,000 euros, followed closely by Magic Circle law firms.

However, it has become increasingly apparent in recent years that salary is not the only decisive factor for young lawyers. Increasingly, a good work-life balance plays a role. Law firms want to and must meet these demands by offering flexible working time models, part-time options, but also more vacation - which can actually be taken.

Qualifications and skills

The prerequisites for achieving the corresponding salary levels remain the grades of the examinations, additional qualifications such as a doctorate or LL. M. (mainly acquired abroad) and excellent, preferably practice-proven English language skills. To some extent, the starting salary also depends on the location of the law firm. It is not uncommon for the same employer to pay an associate in Munich more than one in Berlin for the same qualifications. In large law firms, personal performance is taken into account in the form of bonus arrangements, but so far this has usually only been in the single-digit percentage range of the basic salary. However, approaches can be seen here in which the firm's own (successful) performance is more strongly remunerated.

Medium-sized law firms, on the other hand, often practice stronger personal performance compensation or reward for entrepreneurial thinking. Here, a significantly lower base salary (50-80,000 euros depending on the unit) is supplemented by a higher performance-related component.

Companies have also felt the effects of the crisis. Many of them have introduced short-time work, for example, to bridge a lack of capacity utilization and declining order intake without laying off employees. In such times, the inhouse lawyer cannot expect a salary increase either.

Only in the law firm-like legal departments of Siemens and BMW were the salaries of inhouse legal counsel raised marginally in times of general "freeze". Here, starting salaries of around €80,000 were at least similar to those at some international law firms. Since these legal departments vie for the same well-qualified lawyers as the top law firms, they have no choice but to lure them with such attractive salaries.

Development on the rise again

Due to the good economic situation of the last few years, even the corporate groups were able to increase salaries somewhat. However, they do not reach the region of a 6-digit starting salary. In the future, the salaries of inhouse lawyers will probably not increase immeasurably. Because even though the economic situation has improved, there is still enormous cost pressure for most companies. So it is not surprising that there has been little development in terms of salary trends in the inhouse area.

The most important in a nutshell:

In 2022/2023, starting salaries in some international top law firms will be EUR 180,000 p.a. Such dream salaries require absolute top degrees in legal training as well as additional qualifications with which you can set yourself apart again. The highest annual salary does not always reflect the highest earnings per hour (keyword: work-life balance) Salary development also depends on the general economic situation. It remains to be seen how the economic situation will ultimately affect the international legal market in 2023/2024. Various experts assume slumps in the very relevant M&A and capital market environment.

Evolution of salary structures