Ramped up billing rates are helping drive what looks like an unprecedented surge in compensation for U.S. law firm partners.

Average hourly partner rates have reached $1,114, according to survey of large firms released Thursday by Major, Lindsey & Africa. That's up 36% from the consultancy's last survey in 2022, and up 83% from a decade ago.

Some top firms are charging clients $2,500 an hour or more for their priciest partners, bankruptcy and other court filings show.

The rate increases are a key factor behind what legal industry recruiter MLA called "the highest-ever average total compensation figure and the highest percentage increase in the survey's history."

Average compensation for partners working at the 200 largest U.S. firms rose 26% to $1.4 million on average since MLA's last survey in 2022. The figure was close to half that - $716,000 - in 2014. The latest survey included 1,700 respondents.

Equity partners — those with a traditional ownership stake in their firms — reported average compensation of $1.93 million, and non-equity partners reported $558,000. One respondent said their 2023 compensation was $23.7 million.

"The findings are very positive when you're looking at it from a pure business perspective," Louis Ramos, a managing director of MLA's partner practice group, said.

High rates — and an economy that allows clients to pay them — aren't the only key compensation drivers.

As Reuters has reported, more elite firms have stopped awarding compensation in lockstep with partner status and seniority, making it easier for them to lure and reward lateral hires who may command pay in the $20 million range. A shift away from single-tiered partnerships, meanwhile, has kept a greater proportion of firms' earnings in the hands of those with equity shares.

Large gaps in partner pay are a logical result of having a rainmaker class bringing in the most lucrative clients, cases and deals, said Kristin Stark, a principal at law firm consultancy Fairfax Associates.

"Firms have to pay for that," Stark said. "That is not a fungible skill set. That is not something that walks down the street every day."

MLA's survey noted that originations — the business individual partners generate — were up 26% compared to their 2022 findings. Partners on average generated $3.4 million in business for their firms in 2023.

"If originations are going up dramatically, I think you would expect to see increases in compensation," said MLA partner Karen Andersen. The MLA report called originations the "dominant force" shaping partner compensation.

Many big firms are simply making more money. Law firm revenues increased by an average of 11.4% during the first six months of 2024 compared with the same period last year, driven by billing rate and demand growth, according to data from Wells Fargo's Legal Specialty Group.

Some high-performing firms are on track to see a 15% year-over-year increase in profits and revenue by the end of 2024, said Zeughauser Group legal industry consultant Kent Zimmermann.

"Attracting and retaining the best lawyers in a firm's areas of focus is the whole ballgame for a law firm that aspires to market leadership in its chosen areas of focus," Zimmermann said.

Some of the largest U.S. law firms have also raised associate salaries multiple times amid a fierce market for junior legal talent, with senior associates at top firms now making well over $400,000.

That creates a higher floor for junior and non-equity partner pay, said Bruce MacEwen of law firm consultancy Adam Smith Esq.

"It would be socially and structurally impossible for associates to earn more than non-equity partners," MacEwen said.

The MLA survey found that partners at firms with more transparent compensation systems reported higher pay than at firms where information on colleagues' compensation is limited or kept secret.

And while male partners still make more than their female counterparts on average, MLA's survey found that the gap was shrinking. The average compensation reported by male partners was 29% higher than for women, compared to 34% in 2022.

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