The Power of Compensation Benchmarking
A Law Firm’s Strategy for Retention and Growth
One of our clients, a leading law firm, recently found itself facing an urgent challenge—retaining top legal talent.
In 2023, the firm observed a concerning trend: mid-level associates — particularly in Corporate Law, M&A, and Intellectual Property — were leaving for larger competitors offering more attractive compensation packages. While competitive pay wasn’t the only factor, it played a significant role in the firm's ability to attract and retain talent.
To address this, the firm undertook a compensation benchmarking study — a strategic move to assess how its salary structures, bonuses, and incentives compared with industry peers. The results were clear — base pay and performance incentives were trailing behind market averages, impacting the firm’s ability to stay competitive.
Acting on these insights, the firm implemented key changes:
- Adjusted base salaries to remain within 15% of their direct competitors.
- Revamped their bonus structure, incorporating performance-based incentives tied to billable hours, client engagement, and business development.
- Introduced a Total Rewards Framework, including structured career progression and direct mentorship with reporting partners.
The Outcome?
- Attrition rates declined significantly.
- Applications from high-calibre candidates increased.
The benchmarking study delivered tangible results.
Compensation benchmarking is no longer a luxury — it is a necessity for law firms navigating today’s competitive talent market. Beyond just aligning salaries with market rates, benchmarking helps firms use data-driven insights, to identify performance gaps, set realistic targets, and implement best practices. It is more than just a comparative exercise because it allows companies to stay on top of trends, enhance their performance, and achieve success in a hyper-competitive business environment.
While high attrition rates are a clear sign that benchmarking is needed, firms should not wait for a crisis. Our experience suggests that benchmarking every three years is the ideal frequency.
Why this timeline?
- A shorter interval may not capture meaningful shifts.
- A longer gap could cause firms to fall behind evolving industry trends.
- A three-year cycle enables firms to track patterns while staying responsive to change.
Regular benchmarking is a proactive strategy, not a reactive measure. Firms that integrate it into their long-term planning future-proof their talent strategy and gain a competitive edge.
When conducting benchmarking exercises, organisations should focus on comparing themselves against 3-5 carefully selected peers. More importantly, in today's fluid job market, companies must look beyond their immediate practice areas. One should also look at related practice areas that require similar skill sets or have higher talent portability.
For instance, an Intellectual Property firm shouldn’t just benchmark against other IP firms. The comparison/benchmarking process should also include:
- Technology law firms (which attract IP lawyers for in-house counsel roles).
- Corporate & M&A firms (where IP lawyers transition for deal advisory and licensing).
The goal of compensation benchmarking is not simply to raise salaries. Instead, the objective is to create a well-rounded compensation package that meets the evolving expectations of legal professionals.
- Monetary Compensation – Base salaries, performance-based bonuses, and long-term incentives.
- Non-Monetary Rewards – Career progression opportunities, mentorship programs, and work-life balance initiatives.
- Strategic Differentiators – Equity participation, international secondments, and leadership development programs.
Firms that focus solely on salary risk missing the bigger picture—what top-tier lawyers truly value is a compensation package that supports both financial security and long-term career growth.
"Benchmarking isn’t about offering the highest pay — it’s about aligning compensation with what truly drives talent retention and performance," says Balanand Menon, Partner & Head of Consulting at Vahura.
By neglecting regular benchmarking, organisations risk non-identification of weak areas, which could lead to higher attrition rates and difficulties in attracting top talent. This creates a domino effect: reduced productivity, increased recruitment costs, and potential loss of market share to more competitive rivals. Additionally, such organisations will be making decisions based on outdated market information. This can result in misaligned business strategies, and missed opportunities for innovation and growth.
Compensation benchmarking is no longer just about staying competitive — it is a cornerstone of a successful talent strategy.
By leveraging data-driven insights law firms can attract and retain top-tier legal professionals, enhance lawyer engagement and satisfaction, and ensure long-term business growth by aligning talent strategy with market realities.
In an era where law firms are competing not just for clients, but for talent, the question isn’t “Should we benchmark?” — the real question is “Can we afford not to?”
Looking to conduct a compensation benchmarking study for your firm?
Our team specializes in tailored benchmarking solutions designed to help your firm attract, retain, and engage top legal talent. Get in touch today to future-proof your talent strategy.