Increase in total legal spending in 2008 mostly tracked increases in compensation

Gina Passarella, writing in the Legal Intelligencer, Oct. 14, 2009 on the Thomson Hildebrandt 2008 Law Department Survey (ed. Jon Bellis), extracts some findings that suggest internal budgets were kept mostly flat other than modest increases in compensation.

The survey shows median total spending increased by five percent in the United States and by four percent worldwide between 2007 and 2008. When looking at outside counsel spending, which makes up about 60 percent of the average legal budget, that spending increased four percent in the United States and six percent worldwide. Hence, in the U.S., inside spending, which accounts for about 40 percent of all legal spend, must have increased perhaps six percent so that the inside six percent and the outside four percent comes to the overall five percent.

It is widely known that compensation accounts for approximately three-quarters of a law department’s inside spending. According to the survey, the average increase in base salary for in-house attorneys was three percent and there are usually some bonus and incentive amounts on top of that along with benefits. So compensation increases must have taken up nearly all of the increase in inside budgets. Otherwise, general counsel held the budget line tight.

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