WTR data analysis considers the slow rate of progress when it comes to narrowing the gender pay gap on either side of the Atlantic

Data analysis reveals that the gender pay gaps at UK and US law firms are narrowing but agonisingly slowly. While the rate of progress differs massively depending on firm size, a consistent problem remains: the low proportion of women making it to senior leadership positions, where they have the power to implement large-scale change.

UK landscape

Large firms lead reduction in average hourly pay gap

Last year, WTR examined the gender pay gap reports of 33 UK law firms with high-performing trademark practices. Our analysis revealed that large firms (ie, those with between 1,000 and 4,999 employees) are helping to drive down the average hourly pay gap.

However, progress is limited. The average mean hourly pay gap has fallen from 19.8% to 18.5% over the past four years, and almost two-thirds of firms studied (65%) have reduced their mean hourly pay gap during that time. However, the biggest increase in mean hourly pay gap last year (10.2%) still exceeded the biggest reduction (9.3%). What is more, fewer than half the firms studied (48%) have reduced their median hourly pay gap since 2017. Worse still, the remaining 52% have actually seen it widen – the biggest rise being 24.3%.

Large firms seem to be making the most progress when it comes to the average hourly pay gap; 80% have reduced their mean hourly pay gap, while 60% have succeeded in driving down their median hourly pay gap. By comparison, fewer than half of small firms studied (44%) have managed to reduce their mean hourly pay gap, while only a third have succeeded in shrinking their median hourly pay gap.

Medium-sized firms fare slightly better. Two-thirds (67%) have managed to reduce their mean hourly pay gap, yet they are split an even 50/50 between those that have driven down and those that have increased their median hourly pay.

On average then, hourly pay gaps have fallen a meagre amount over the past four years. The average mean hourly pay gap has dropped 0.7% across all firms, while the average, median hourly pay gap has fallen by only 0.2%.

Again, this is mostly due to the efforts of large firms. Those with 1,000 to 4,999 employees have reduced their average median hourly pay gap by the greatest amount (down 4.7%) and their mean hourly pay gap to the lowest average rate of 17.3% (down 3.2% on 2017).

In contrast, medium-sized firms have the highest hourly pay gaps on average – and these are rising. The average median hourly pay gap at a mid-sized firm has grown 1.6% to a worrying 31.6%, while the mean hourly pay gap has climbed 1.1% to 20.5%.

Smaller firms are generally more mixed. Their median hourly pay gap has increased the most – up 2.3% on average. However, they have managed to make some progress in shrinking their mean hourly pay – albeit by only 0.3%.

Bonus pay gaps shrink faster, but disparity remains

When it comes to bonus pay, small UK firms (ie, those with fewer than 499 employees) are taking the lead, but again, there are still disparities. Despite dropping almost 10% over the space of four years, the mean bonus pay gap is still a worrying 31.5% on average, and nearly half (43%) of the firms studied have seen it increase – with four firms reporting a disparity of over 50%.

Across all firms, the percentage of men and women who receive bonuses is fairly even. On average, 64.8% of women and 64.4% of men received a bonus in 2021/2022. Almost two-thirds of firms (63%) have seen an increase in the percentage of women who receive bonuses, but this means that over one-third of firms (37%) have seen a fall in the percentage of women receiving bonuses – the biggest drop at a single firm going from 44.6% of women in 2017/2018 to 15.5% in 2021/2022.

While the percentage of women paid bonuses in 2021/2022 is higher on average than the percentage of men, a clear gender pay gap remains. On average, the median bonus pay gap across all firms is 27.7%, and the mean bonus pay gap is 31.5%. Over one-third of firms (37%) have seen their median bonus pay gap increase over the past four years (the biggest rise going from a 13.2% gap in 2017/2018 to a staggering 50.9% in 2021/2022). Meanwhile, 43% of firms have seen an increase in their mean bonus pay gap – with four firms reporting a mean bonus pay gap exceeding 50%.

Things are improving, though. The average median bonus pay gap has fallen 7.9% since 2017/2018, while the average mean bonus pay gap has dropped to 8.3%.

This has been largely driven by small firms, where average bonus pay gaps have narrowed the most (down 17.6% (median) and 15.1% (mean)). As a result, small firms now boast the smallest bonus pay gaps, with a median of 17.5% and a mean of 20.6% – far lower than the overall industry averages.

Mid-sized firms again seem to be the slowest to change, reducing their median bonus pay gap by an average of only 1.7% and their mean bonus pay gap by an average of 4.7%. Although large firms have made better progress (reducing their median bonus pay gap by 8.4% and their mean bonus pay gap by 7.1%), they also still exceed industry averages.

Overall, 60% of firms have managed to reduce their median bonus pay gap over the past four years, while 57% have reduced their mean bonus pay. In fact, median bonus pay is the only area in which some firms have eliminated the gender pay gap completely.

Fewer than one in three partners are women

There are multiple reasons why some firms are making better progress than others. Big firms are more likely to have the business confidence (and client demand) to take a coordinated approach and make firm-wide changes. They are also more likely to be internationalised and thus may have cultural input from other places (eg, the United States). In contrast, smaller firms may have more flexibility and appealing to an increasingly female talent pool is one way to remain competitive. Mid-sized firms are therefore stuck in the middle; they are more likely to have a disproportionate number of men in senior and partnership positions, but they are also having to work harder to maintain market position and thus, they may not have the time and resources to give the issue of gender pay disparity enough attention.

The proportion of women in senior, fee-earning positions is vital here, as they are arguably the ones with the power to lead change. WTR used database platform Legal Monitor to examine the gender breakdown of each of the 33 trademark-leading law firms required to submit gender pay gap reports last year.Our analysis found that as the size of the firm increases, so too does the average proportion of female employees and partners. For example, among small firms, women made up an average of 49% of all UK employees and 27% of all UK partners in July 2022. This increased to 51% of employees and 30% of partners at medium-sized firms, followed by 52% of employees and 31% of partners at large firms.

Considering that, on average, women make up half the workforce at these firms, the percentage that holds senior positions is clearly far too low. The situation improves slightly when looking specifically at IP departments. On average, women made up 52% of IP employees and 34% of IP partners across the firms that we examined in July 2022.

But genuine change is implemented on a firm-wide, rather than practice-specific, basis. As long as fewer than one in three partners are women, progress will remain slow.

US landscape

Male partners earn 25% more

In October 2022, Major, Lindsey & Africa (MLA) published its seventh biennial Partner Compensation Survey. Fielded in partnership with Law360, the 2022 study surveyed 1,815 lawyers across the United States to gauge the range of partner compensation and partner satisfaction with their compensation, among other things.

The 2022 Partner Compensation Survey found that over the past two years, average partner compensation has increased 15% to $1.12 million – the highest percentage increase since 2016. However, the average male partner’s compensation is $1.21 million – 8% over the industry standard and a whopping 25.2% more than female partners, who receive an average $905,000 – 19.2% less than the industry norm.

This discrepancy is echoed by 2021 Bureau of Labour Statistics data on the median weekly earnings of full-time wage and salary workers, which found that female lawyers earned 26.5% less than male lawyers in 2021.

However, according to the MLA survey, female partner compensation has grown at a greater rate than male partner compensation over the past four years. Female partner compensation increased an average of 26% between 2018 and 2020, following a 15% increase between 2018 and 2020. By comparison, male partner compensation increased 17% between 2020 and 2022, off the back of a 7% increase between 2018 and 2020.

As a result, the so-called ‘pay differential’ between male and female partners is narrowing. In fact, it has shrunk from an average of 53% in MLA’s 2018 survey to 44% in 2020 to 34% in 2022.

“One can only hope that these gains reflect that firms are finally getting the message,” the report states, “though much more work needs to be done”.

The gap is also narrowing when it comes to billing rates. Female partners’ average hourly billing rate increased by 10% between 2020 and 2022 to $790. Male partners’ average hourly billing rate increased by 5% to $828, essentially halving the gap in billing rates from 10% in 2020 to 5% in 2022. That said, female partners’ average hourly billing rate remains 3.5% lower than the industry average ($819). What is more, the average billing rate for IP partners has decreased by 1% since 2020 ($811 down from $816). Therefore, it is unclear whether the industry average for female partners accurately reflects female partners working in intellectual property specifically.

In fact, the average IP partner compensation fell from $1.012 million in 2020 to $1.010 million in 2022. As a result, IP partner compensation is now slightly below the overall average, making intellectual property the third lowest practice area studied (ahead of only labour and employment ($653,000) and real estate ($953,000)).

Satisfaction improves among IP and female partners

Despite a dip in total compensation, satisfaction among IP partners has actually improved. In 2022, 31% of IP partners reported being “very satisfied” with their compensation (2% higher than the industry average), while only 4% reported being “moderately dissatisfied”. This marks an improvement on the 30% who were “very satisfied” in 2020 and the 10% who were “moderately dissatisfied”.

Satisfaction is also improving among women. The percentage of female partners who claim to be “very satisfied” with their compensation has increased from 19% in 2018 to 24% in 2020 to 26% in 2022. Meanwhile, the percentage of female partners who claim to be “very dissatisfied” with their compensation has dropped from 11% in 2018 to 6% the past two years, while those “moderately dissatisfied” has also dropped from 11% to 7%.

This suggests that other factors are at play when it comes to overall satisfaction with pay. Respondents may find that improvements in working conditions, such as billable hours and work-life balance, outweigh the disappointment of stagnancy in their total compensation.

Less than 5% of leadership is made up of women from minority racial and ethnic groups

This data also does not take into account any changes in the number of women in partnership roles. According to the second edition of the American Bar Association’s (ABA) Model Diversity Survey published in May 2022, the percentage of female partners in the United States decreased in 2020. Only one in five equity partners (20%) and less than one-third (30%) of non-equity partners were women. Further, 84% of equity partner hires and 62% of non-equity partner hires in 2020 were male, compared to just 16% and 38% of female hires.

Considering that the number of women in associate roles is increasing, and in 2020, women made up between 45% and 57% of law firm associates, the discrepancy in the number of women climbing the law firm ladder but remaining shut out from partnership level is stark.

A lack of representation at senior leadership level is likely to affect the pace of change when it comes to narrowing the gender pay gap. The representation of female attorneys on compensation committees declined in 2020, whereas it increased substantially for White male attorneys, the ABA report notes. Moreover, less than a quarter (20% to 25%) of firm leadership that year were White female attorneys, while only a shocking 2% to 5% were racially and ethnically underrepresented female attorneys.

Dwindling optimism among female lawyers

Given the slow rate of change to promote women to senior – and therefore decision-making – leadership levels, it is little surprise that 84% of UK female lawyers in a recent survey by the Next 100 Years admitted that they do not expect to see gender pay equality during their career. Worse still, they feel that firm commitments to reducing this disparity are more about headlines than real change. While two-thirds of female lawyers agree that the gender pay gap is an “urgent issue for women’s equality in the legal profession”, roughly the same number (62%) believe that fixing the issue is not a priority for senior management. The data arguably corroborates these concerns.

“The lack of faith in law firm leadership’s willingness to tackle the gender pay gap is not only alarming for the immediate and future careers of women in the industry, but also for the future of the industry itself,” Dana Denis-Smith, founder of the Next 100 Years, stated. “With inclusivity playing an increasingly large role in employee retention, such sentiments, particularly amongst the younger generation, have the potential to impact future employee turnover in the legal sector.”