Understanding Compensation at Boutique Law Firms: Trends and Insights

What Is a Boutique Law Firm?

A boutique law firm is generally perceived to be a small firm that has expertise in one or a small number of areas of practice. They are identified by their nimbleness, excellence, and focus rather than by sheer size, and they are often seen as the successor to the "firm of one," which was a common name for sole practitioners in a specialty. In the last three or four decades this model has become popular for most law practices, and firms such as Wachtel, Lipton, Rosen & Katz and Heller, Erhman, White & McAuliffe began to dominate the legal landscape. In addition, many other groups sprang up with a narrow focus, from traditional business practices that had been broken up into the more nimble boutique, to "better boutiques" that offered top-tier service at lower rates with a smaller number of partners .
What did these firms have in common? The first aspect was a significant amount of expertise in one area or a small number of areas. It is this expertise that attracts clients, and helps both to maintain the business of the established boutique, and to encourage new and better boutiques to come into existence. Many of the major boutique firms have practiced for years with either no or very few lateral hires, so that the main source of business is not a large number of small clients but perhaps a few larger clients. Similarly, the makeup of a boutique firm is not a large number of junior or mid-level specialists, but rather a small number of senior specialists and a few highly qualified junior specialists brought in under the tutelage of the senior hands.

Compensation Factors for Boutique Law Firms

Determining compensation at a boutique firm is not an exact science and is influenced by a variety of factors. A former managing partner of a top ten New York boutique stated, "We are looking for people who are going to make a difference for our clients…if you have it, we are going to pay you well." A firm’s location can bring discrepancies in salaries. Generally speaking, boutique firms on the West Coast and in New York, Chicago, Boston, Washington, D.C., Houston, Dallas, Miami, Toronto, and Vancouver pay higher salaries per class year than those firms located in other parts of the country. Larger firms’ starting salaries in coastal cities are similar to those in major Midwestern and Southern cities, so boutique firms in these areas are typically in line with their competitors. Additionally, practice area can influence compensation at many firms. Information compiled by the National Association of Law Placement (NALP) comparing starting salaries in different specialties show that certain departments (e.g. IP litigation) generally pay higher salaries and have more graduating class members hired than others (e.g. labor/employment). Multiple sources confirm the conclusion that law firms that emphasize antitrust and intellectual property law tend to be on the high end of the salary scale, while real estate and family law firms are at the low end of the spectrum. Firms of varying sizes also have different pay scales. Based on NALP statistics, which reveal prestigious AmLaw 100 and 200 firms’ attract more graduating class members than do smaller AmLaw and regional firms. This signals to us that starting salaries might be higher at the larger firms. Most likely starting pay at smaller boutique firms is closer to that of smaller AmLaw or regional firms. A firm’s reputation and status, achieved through smart marketing, good client relations and selectively hiring top ranked attorneys, has a direct impact on its overall pay structure. Law firms that are known for being discriminating and selective in hiring and retaining its attorneys offer larger pay packages in exchange for top talent.

Salary Comparison: Large Law vs. Boutique Firms

Beyond the prestige of a particular boutique, pay is one of the most significant factors in law firm employment. Our surveys show that the salaries of alumni of firms with fewer than 50 lawyers are less than those of graduates of larger firms.
As we recently reported, according to the National Association for Law Placement, in 2022 the median first-year associate salary at firms of 701-1000 lawyers was $205,000 compared to $180,000 for those at firms of 501-700 lawyers. In comparison, the median first-year associate salary was only $157,000 at smaller firms. For second-years, the pay was $210,000 at the largest firms, $190,000 and $183,500 at firms with 501-700 lawyers and those with 251-500 lawyers, respectively. Those in their second year at boutiques start out at a median salary of only $134,000.
We have surveyed the salaries of almost all large U.S. law firms for years, but as say above, the surveys of smaller firms is more limited. A 2022 survey of 52 U.S. boutique firms by Vault did not include many of the country’s large boutiques like Bradleys, Cahill, Kramer Levin, Latham, Milbank, Paul Hastings, Skadden, and Sidley. With that caveat, however, the Vault survey found that the mean first-year associate salary at smaller law firms was $156,513 and the median was $155,000. Somewhat lower than the national statistics at size (approximately the same number of lawyers as boutiques) and higher than other firms of size. Vault commented, "Salaries and bonuses are close to big law levels and directly correlated with size."
Vault has also produced firm-by-firm data. For example, Nutter McCLennen’s first-year associate salary is a boutique-level median at $148,000 and the second year is $164,000. Nutter moved up the rankings on the Vault list this year from 109th last year to 83rd. Baker Hostetler pays its associates $160,000 to start and $175,000 in the second-year. That compared to $195,000 at Skadden. Lastly, our data shows that second-year salaries have risen to $170,000 at Morris Nichols.
These examples clearly suggest that boutiques pay less than larger firms, but there can be large variations depending on the firm’s strategy and model, as well as the location of the firm.

Benefits of Working for a Boutique Law Firm

Beyond salary, there are several potential benefits to working at a boutique law firm. First, boutique firms tend to provide greater work-life balance. Due to lower overhead and fewer clients, boutiques have typically been able to maintain lower billable hour requirements than larger firms. Additionally, the absence of large office spaces means more space allocated for individual offices, which often provides greater privacy and quiet with a much less distracting work environment. Further, smaller associate classes often mean not having to compete with 50 or 100 other first-year associates for partner attention or business opportunities.
Another career benefit to working at a boutique law firm is the ability to have an immediate and very significant impact on firm development and practice area growth. Associates at boutique firms often have direct access to partner-level mentorship , which can come through both substantive work as well as individual friendship.
In addition to already specializing in a practice area, boutique firms tend to have the opportunity to hone that skill even further. Because many boutiques are spun off from larger firms, they often have a specialized niche of practice that is not easily replicated by bigger firms. Several examples I can think of are law firms that focus on alternative co-location space or global privacy compliance (to name just a couple).

Salary Negotiation Tips for Boutique Law Firms

When it comes to negotiating salaries at boutique law firms, applicants need to do their research and understand what the going rate is in their target market. This will allow them to make a reasonable request to their potential employer, and put them in a good position to receive better pay. Similarly, this means understanding the specific market conditions and need in your city. When it comes to negotiating salary, applicants shouldn’t shy away from cities that have lower rates than their current location (provided they are comfortable moving). However, it is essential to understand the broader economy and the ability of the local market to afford higher salaries. Understanding the local economy in more detail can help applicants select the city in which they will see the most benefit from their work. All of this said, it is also vital for applicants to understand that salaries in their field can be contingent on other factors. These can include demand for applicants in their specific field – or specialization – and the demand for legal services from clients in that area. Conversely, the applicant can also look into the specialization and expertise of the firm itself. A firm that specializes in the applicant’s expertise – or one that is well-known for handling complex cases in that specialization – will be more likely to be able to pay higher salaries to an applicant in that specialization. Again, this is essential to keep in mind when negotiating a salary. It is also important to look into the applicant’s own skills and qualifications. While any firm would benefit from hiring someone with a great legal background, it is especially important for an applicant who will be taking a less popular specialization. In these cases, exceptional skills can be an excellent way to improvise on the base salary request. It is also worth noting that an applicant should receive significantly higher pay if they are a partner at the firm. Likewise, an applicant should expect to receive much higher pay for experience gained in firm with high overhead.

Trends in Law Firm Salary for Boutique Firms

Part of what has added to the allure of boutiques is the perception that they offer increased opportunities for upward mobility. One reason for this is that a large number of partners in recent years have left big law firms to hang their shingles at boutiques. As one California attorney put it, "people were leaving the big firms because they were frustrated. They perceived – and I think it was true – that those firms were getting so much bigger that advancement within the law firm was becoming much harder, even though many had great practices. So they could either sit around their offices and hope to be partners, or they could come to a boutique and pretty much know that if they brought in business they would become partners and get equity." Undeniably, clients also see it that way: Boutiques are "good for [building] a successful career… and they’re good for my client’s wallet" and, because they charge less and have lower overhead, as well as more flexibility in scaling their services.
This paradigm has held true even as the attrition rates of partners joining large firms have decreased. In fact, smaller firms have managed to capture more of the market, successfully taking business from larger firms in the process. According to recent studies, since 2009, business among Am Law 100 firms has fallen in 20 practice areas, while they have shown significant gains in only six. To date, boutiques have gained market share in 21 practice areas, making them highly competitive in comparison to their larger counterparts. Interestingly, despite the perception that they, too, are feeling the pressure of rising salary scales, compensation data shows that there is a lower correlation between size and pay when it comes to smaller firms . In fact, firms employing 200 or fewer attorneys saw a median pay increase of 1% from 2014 to 2015.
Another factor for these trends may be the nature of the work itself. CDAs say that, while there is a slight premium on compensation at social justice law firms in some areas of specialty where billing more than write-offs is necessary to make ends meet, "most CDAs acknowledge that they took the jobs at their firms because they wanted to work for causes they believed in and were willing to downscale their living expenses in order to do work they liked." People also want to work with their "own kind," and boutiques are seen as more permissive, yet hard-working environments. With a friendlier environment and greater opportunity to move up, lawyers feel that they are compensated favorably for the demands placed on them by their firms.
However, the recent market shift towards boutique firms is not in the past, with recruiters making only speculations about "the future of the AmLaw 200 as we know it" (relating to a shift in hiring habits). Quite the opposite, competition has increased, with smaller firms in particular snatching up lateral talent at an increasing rate. Nevertheless, being small has its advantages; boutiques are better able to "keep pace with the charging clients," better furnish mobile workforces, and satisfy their firm’s chief executive officer that "you really understand your business and just rely on us for our expertise." Even though Biglaw partners remain reluctant to "leave the mothership," more and more corporate and litigation boutiques are springing up in their place. Since 2011 alone, over 240 new firms with 50 U.S. attorneys or fewer have popped up, outnumbering the equivalent number of Am Law 100 firms.