Lulu Rumsey | Latin Lawyer
Fewer associates feel positive about their salaries than they did a few years ago – and for good reason, as many pay packages are not rising above inflation. But despite meagre economic growth putting paid to increases, more associates rate their wages positively than negatively. Here we present our findings on what law firms are paying their associates and what forms of non-financial compensation they are offering to sweeten the deal.
As members of generation millennial, today’s crop of associates are sometimes categorised as hard to pin down and even harder to please; less interested in conventional career goals and not as likely to be swayed by big bucks alone than some of their predecessors might have been. But with most associate salaries in the region failing to increase above inflation, even the enhanced offering of non-monetary forms of compensation now on the table are not enough to sustain optimism levels.
Our latest survey into what law firms pay their talent reveals dwindling levels of enthusiasm for salaries in some of the biggest economies in the region, as price rises eat into real monetary gain from pay increases. Even in one of the highest-paid jurisdictions – Mexico – the steady wage increases of recent years are a thing of the past, thwarted by a more subdued economic environment under the AMLO administration.
In the face of inflationary pressure and currency volatility, non-monetary forms of compensation are a good way to make sure associates are fairly credited for their hard work. Although more common than they used to be, the perks of working for a Latin American law firm still fall short of those company lawyers get – which might be why despite facing the same macroeconomic pressures on salaries, in-house counsel report higher levels of satisfaction with their wages than their law firm counterparts.
We polled more than 200 associates from Latin Lawyer 250 law firms across Latin America to find out what law firms pay them and what forms of non-financial compensation they get. We also asked associates how happy they are with their remuneration. Here’s what we found out.
Highs and lows
The highest earners among Spanish-speaking countries are in Mexico, Peru and Chile. Of that bunch, senior associates in Mexico are the best compensated of their class, earning US$8,000 per month on average, while Peruvian and Chilean lawyers at the same level are on US$7,060 and US$6,700 respectively. Mexican mid-level associates are also top of their pack, taking home around US$4,400 a month. Their counterparts in Peru pocket US$4,240 and in Chile, US$3,780. The highest earning junior associates are in Peru, where take-home monthly pay is around the US$3,500 mark. This is more than the US$2,500 average in Mexico and Chile.
Junior associates in Brazil are paid around US$1,580 per month, while mid-level lawyers take home US$2,138 and senior associates US$4,200. At first glance these figures appear less than what peers in smaller neighbours take home, but the reality is different. Brazil’s unique employment tax model affects the pay structure associates follow, making comparisons with other countries difficult. Brazilian firms often choose to appoint junior partners (parallel to a senior associate outside the country) and bonuses on top of salaries can be very high.
Our numbers for Brazil are fairly consistent with research we conducted in 2017, suggesting that macroeconomic factors have curtailed significant salary increases in the time since then. “As the country has faced years of recession, the pressure on raising salaries has weakened,” acknowledges Lobo de Rizzo Advogados managing partner Rodrigo Delboni Teixeira.
Salaries in South America’s second largest economy appear to have taken a hit. Our survey shows junior lawyers in Argentina can expect a monthly salary of US$910; mid-level associates, US$1,300; and senior lawyers, US$3,300. These numbers are down on the salaries we recorded in 2017, with the biggest discrepancy between mid-level associates’ pay packets, which are on average almost US$1,000 less than two years ago. However, it’s likely our figures for Argentina are skewed by its tanking peso, which more than halved in value against the dollar in 2018 and continues to be volatile. (Our survey only asked associates to tell us their salaries in US dollars, as opposed to local currency).
The lowest earners we recorded are in the region’s smaller economies, including Paraguay, Bolivia and the Central American countries. Our figures for Venezuela are strikingly low when compared with the rest of the region, but the singularity of Venezuela’s situation and the unique pressures on salaries make comparisons of the numbers problematic. For a start, most junior associates tend not to attach the same importance to their compensation as lawyers in other countries. “What’s more important to them is the opportunity to learn and be trained by one of the best firms; they see it as a stepping-stone to an LLM or possibly a job in the US or abroad,” says D’Empaire’s Fulvio Italiani. Salary becomes more central when it comes to senior lawyers that have decided to stick it out in Venezuela. They want decent compensation that is paid in US dollars, as well as a clear partnership track. “Otherwise, why stay in Venezuela?” says Italiani.
International firms with offices in the region pay associates more than their local counterparts – more than double the local rate on average. This difference is most pronounced among junior and mid-level associates, suggesting global firms with a presence in Latin America are employing big money to get young lawyers in the door. The contrast is especially pronounced in places like Peru and Colombia, where the contingent of law firms that are part of or affiliated to a global firm are a formidable presence.
That Mexico, Peru and Chile are home to the highest earners is in line with our findings in 2017 and 2015 (although it should be noted that this year we opened the survey to a larger pool of respondents than in previous years). These countries’ solid macroeconomic foundations, high level of foreign direct investment, pro-business governments and relatively stable politics go a long way towards explaining why lawyers in these countries have consistently out-earned their counterparts in other jurisdictions. The presence of a greater number of international firms, driving up competition for talent, is also likely to be a factor.
A lot has changed since we last surveyed associates’ salaries. For one, Mexico no longer has a president in Los Pinos. Socialist Andrés Manuel López Obrador shunned the official residence of the office of the presidency when he was elected in late 2018. Since he took office, Mexico’s economy has noticeably slowed down and GDP expanded by just 0.1% in the second quarter of 2019, something López Obrador’s critics blame on his unpredictable economic policy.
The average salaries we measure for associates in Mexico have not increased since 2017. Sánchez Devanny managing partner Ricardo León Santacruz says policies implemented by the current administration – including the cancellation of the Mexico City airport upgrade and the slowing down of the energy reform – have contributed to a general slowdown that has impacted wages. “The pressure on salaries has cooled down; we’re not seeing an upwards trend anymore.” A bigger pool of talent is another contributing factor: shortly after entering office, the López Obrador administration established salary caps for government employees, prompting many to leave government and enter the private sector. “That opened the door for a pool of talent to come out of government offices for law firms to pick at,” says León.
Can’t get (as much) satisfaction
Although around 43% of associates are satisfied or extremely satisfied with their compensation (more than the proportion who report negative feelings about their salaries), the percentage is less than those who reported the same level of contentment two years ago (56%). One reason positive feelings about wages have waned could be that most associates’ salaries are not rising above the rate of inflation. Just under two thirds of respondents said their pay was not tracking prices.
Argentina – which has long suffered from persistent price rises – closed 2018 with inflation close to 50%, the highest it has recorded in nearly 30 years (although under some administrations, the office of statistics gave false figures for inflation). It’s set to fall in 2019, but only to around 34%. Argentina is an extreme example when compared with the rest of Latin America – with the exception of Venezuela, where hyperinflation has skewed salaries for years – but even in the more robust economies it can eat away into associates’ pay increases. In Brazil inflation hovers between 3% and 4%, but that’s enough to diminish salary gains. Around 36% of Brazilian associates responding to our survey said their salaries have not increased over the past year, while a further 27% said theirs had risen by between 1% to 3%. Only around two fifths of Brazilian respondents reported any real increase in pay after inflation.
Even some of the region’s best compensated lawyers have been handed pay rises that only just surpass inflation. In Chile, this is down to a broader economic slowdown that began under the Bachelet administration with the implementation of a controversial tax reform, among other anti-market measures, says Carey’s managing partner Jaime Carey. “Due to this, salaries have not increased much more than the inflation rate during the last four to five years. [Now] after a bit more than two years in office, the economy and business environment is beginning to improve due to the steps taken by the government of President Sebastián Piñera.”
Private practice vs. in-house
Macroeconomic pressures are not selective in whom they affect; everyone feels the pinch when wages are not keeping up with inflation. But LACCA’s data shows that although just over half of company lawyers said their salaries had not risen above inflation either, they tend to be happier with salaries than their private practice counterparts. Around 54% gave positive responses about their wages.
It is difficult to draw direct comparisons of salary data we collected from associates and in-house counsel, largely because our in-house counsel survey included GCs. As the best compensated in-house attorneys, their salaries are more closely comparable to partners’ than to some associates’. Because they follow different hierarchical structures, it can be difficult to assess whether private practitioners’ earnings beat in-house lawyers’. For example, more company lawyers (95%) than associates (85%) get bonuses, but associates are the ones more likely to see their take-home swell significantly as a result of performance-related or discretionary rewards, while most in-house lawyers’ pay comes from their salaries.
But it is possible to draw comparisons between what goes into an in-house counsel’s salary package and what’s on the table for associates. For example, only around a third of associates say their employer makes contributions to their pension pot, considerably less than the 55% of in-house counsel who say the same. But unless law firms abandon the partnership model this is unlikely to even out. As partners are not covered by statutory pension laws, it tends not to make financial sense for law firms to dedicate time, effort and resources to build and manage a pension fund system.
The whole package
In-house lawyers appear more satisfied with their compensation overall, which could be a result of them getting a better package of benefits. It’s considerably more common for in-house lawyers to get perks; 96% get health insurance, while only 75% of private practice lawyers do, for example. Life insurance is part of the package for 87% of in-house attorneys but only 26% of associates, while 88% of company lawyers get a mobile phone compared with 35% of their law firm counterparts. More company lawyers are happier with the perks they get than private practice lawyers are.
But if things continue the way they are going, that could change. It is becoming more and more common for law firms to reward their lawyers with a mix of financial remuneration and non-monetary incentives, the latter of which are especially popular with millennials. That generation also attaches great importance to what their employers can offer them to advance their careers, either through subsidised LLM studies abroad or paid-for further education at home. “Those are common themes in our recruitment process nowadays,” says Lobo de Rizzo’s Teixeira.
Perks have become so integral to compensation packages that recruiters think it’s common for associates to expect them as a prerequisite to accepting a job offer. “Salary is important, but so are both tangible and intangible benefits,” says Lauren Biszewski, a consultant for Latin America at legal recruitment agency Legalis. “Flexibility and work–life balance are key considerations in an associate’s job search. Training, growth opportunity, respectful treatment and recognition are also factors. Associates view these types of policies as indicative of an inclusive culture, which of course is appealing.”
The precariousness of many Latin American currencies is another reason why benefits packages are so sought after. “In light of that volatility, generous benefits become even more attractive as part of a compensation package,” says Biszewski. “Associates are not just focused on the numbers, but the whole package.”
The great gender divide
Our data indicates that when you look at compensation for men and women of the same level and jurisdiction (but not necessarily the same firm) men commonly earn more than women. In Mexico on average female junior associates earn about 8% less than their male counterparts. The difference in pay diverges further the higher up the ladder you go: we recorded male senior associates earning – on average – double their female counterparts. In Brazil – where firms are commonly more engaged with diversity initiatives than in Mexico – male respondents earn more than female ones at junior, mid and senior level. The difference is greatest the higher up you go; male senior associates earn 16% more than their female co-workers.
It makes sense that a divergence in pay along gender lines becomes more apparent with seniority. The opportunity for associates to climb career rungs often occurs around the same time women are contemplating motherhood. The latter understandably limits the amount of time they can put into their work, and compensation is tied to the hours they put in.
Taking into account the entire spread of respondents, we measure female associates across the region earning around 30% less than their male equivalents. Obviously, there are lots of variables that come into play to decide an individual’s salary, education and international experience to name a few. Our findings do not compare male and female associates at the same firm, so may be distorted by having more female respondents from small to medium local firms, which may pay less, and more male associates from larger firms or firms that are part of global entities and could pay more.
Big differences between male and female earnings in the same jurisdiction and at the same career level are disheartening – but the disparity itself is not out of kilter with the rest of the world. In Latin American societies – as is common the world over – women are still the primary caregivers. While underscoring that there is no pay disparity along gender lines at his firm, Enrique Gómez-Pinzón, executive partner at Holland & Knight’s office in Bogotá, points out how being the primary caregiver can impair a female lawyer’s career progression. “It means they have less time either for their family or to commit to work; it’s a reality we can’t hide from,” he says.
If they decide to prioritise the former, it limits the number of hours they can commit to their professions and ultimately curbs their pay. “Latin American society can still be considered culturally sexist,” sums up Guilherme Nicolau, a recruiter at Laurence Simons in São Paulo.
The composition of most law firm partnerships is evidence that there is a long way to go before most firms achieve gender parity at the top level. At Latin American Latin Lawyer 250 firms, only 23% of partners are women. Progress is slow, but evident. More women are being included in partner promotions rounds and more firms have dedicated focus groups designed to protect a diverse working environment. “Looking at the lawyers that have become partner in major law firms in the past few years, there is a good balance of men and women,” says Nicolau. “The same can be said about the top general counsels in Brazil, where the ratio is 60% men and 40% women; that indicates that some progress is being made.”
Source: Latin Lawyer
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