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In-house vs Law Firm: Which Path is Best for You?

February 3, 2023

The choice between a career as an in-house counsel vs. in private practice depends on the value you place on an optimal work/life balance, your financial aspirations, the type of work you prefer to perform, and your legal specialty. This article discusses in-house vs. law firm career paths, highlighting the pros and cons of each option to help you make an informed decision as to which path is best for you.

Work/Life Balance

As a lawyer in a law firm, you are a profit center and must bring in as much or more revenue as your peers in order to be successful. Law firms’ business model is typically to bill clients by the hour, so in order to generate enough revenue, you have to bill a high number of hours and be efficient at the same time so that your hours don’t have to be “written off”. (That is, if a client believes that an associate spent “too much time” on a matter, they will ask the partner in charge of their account for a reduction of those hours, meaning the associate is now not as profitable on that matter.) This results in a good deal of pressure for attorneys in this environment and leads to working long days and most weekends as well.  It takes well over 40 hours of work in a week in order to bill 40 hours, so for most associates, a 60-hour work week is common, and sometimes quite more. Law firms track associates’ hours and have “minimum billable hours”, which adds even more pressure and also means that if certain days are not productive or if sick time is needed or vacation desired, an associate must work even more in order to make up for being “off track” on your billable hours due to the time off.  As you can imagine, balancing work and life can prove challenging as an attorney at a law firm. Of course, this is not the case with all private practice law firms, especially with many smaller (“boutique”) firms who are able to attract large law firm associates with the promise and reality of fewer hours, which they can accomplish because they have lower overhead than large law firms and don’t requires as high of “profits per partner.” But it is the typical expectation in a large law firm and most large law firm associates work long hours.

Your week as an in-house lawyer likely looks much different. Longer work weeks are far less common, as there are no billable hour requirements and lawyers are expected to work similar hours as the rest of the employees in the company. This allows for more predictability in your hours from week to week. Of course, long days may be necessary at times, particularly when the organization is facing a filing deadline or in the middle of a huge transaction or crises. Outside counsel are typically hired for these types of events, however, so even then, it’s often the outside counsel working late to meet the deadline or handle the crises. So, the ability to balance your work schedule and your life outside of work is easier as an in-house lawyer on average. Subsequently, attorneys who need a predictable schedule for family reasons or their own mental health or personal preference strongly prefer the predictability and lower hours as an in-house lawyer. In addition, when you want to take a vacation or need to take a sick day, or if you just have an unproductive day, no one is tracking your hours and realizing that you’re now “off track” for your billable hour requirement. This results in less stress in your daily life.

Compensation

Attorneys in private practice, on average, earn a higher cash compensation than in-house attorneys, especially early in their career. Since private practice attorneys are profit centers for their firms, even first year associates are paid very high starting salaries by large law firms – over $200K annually. Year-end bonuses are based on how profitable you are – i.e. how many hours you billed – so the cash bonuses can be quite large for associates at large law firms, adding to your annual cash compensation and the differential between law firm and in-house compensation. While the compensation is generous, the dollars come at the price of less time at home, with loved ones, with friends, and pursuing other interests, and often requires having to cancel personal plans at the very last minute.

Since an in-house lawyer is not generating the direct profits as they are with private law firms, the pay is usually less. This is largely because lawyers within an organization are seen as an expense or “cost center,” even though their work can save the company a great deal of money in the long run. While in-house lawyers on average do not make as high of a base salary, especially in their early years, they do receive annual bonuses which are typically based on how the company as a whole performs, not by how many hours they worked. In addition, companies typically provide much better “fringe benefits” than law firms, which tend to focus on cash compensation to their associates. Companies usually provide a 401k with the company contributing a “matching portion” each year, a better a lower cost health coverage and other insurance benefits, and often stock options or some other type of equity in the company that can be quite lucrative over time with successful companies. When all the tax-preferred benefits provided by an in-house job are considered, along with annual bonuses that are based on how the company performs, the total compensation received by an in-house law as compared to a law firm associates compares much more favorably, especially if you consider the amount you are earning per hour worked.

Type of Work

In law firms, specialization is much more common. Specialization allows the firm to offer a broader range of legal services to clients, and to bill a higher dollar amount per hours due to their attorneys’ expertise in a certain area of the law or within a certain industry. Sometimes these specialties are in rare, niche areas.  This allows young associates to develop expertise in specific areas of law, leading to more efficient and effective representation for clients, as well as increased opportunities to brand yourself as an expert in a certain area, which helps in business development efforts.

While very large companies with very large legal departments do hire attorneys who are highly specialized, most in-house legal departments are smaller and their attorneys handle a wide variety of different legal matters.   With very small companies, the in-house attorney must be “generalists” who handle matters from contracts to transactions to managing litigation to supporting HR in employment law questions.    In-house attorneys must learn and understand the business and risks their organization faces and their advice impacts important business decisions the CEO and other business leaders  make. They therefore serve in a more general capacity and may be called upon to tackle any number of tasks.   In fact, in-house attorneys may also be called on to provide general business advice in addition to legal counsel, since their legal experience helps them understand the inherent risks involved in various options. Legal talent in a law firm, on the other hand, will find themselves completing much more project-oriented work, focusing on discrete transactions or cases for clients.

Lastly, lawyers that work for private law firms often have the obligation of development new business – i.e.  bringing in new clients (also called “rainmaking”). This is especially important if the lawyer intends on making partner. In-house attorneys exclusively serve the organization that employs them, so no business development efforts are required.

Area of Interest

The area of interest you have chosen may play a large role in determining whether an in-house position or a position with a law firm is best suited for you. For example, if you prefer that your day involve a wide range of different types of legal issues and areas of the law, then an in-house role might be a better fit for you. While if you enjoy being an expert in one particular area, and a lawyer who is sought out for this specialized expertise, then you might be happier in a law firm. In addition, some areas of law are only found in law firms and are not typically done by in-house lawyers, and certain areas of law practiced in law firms is often desired by in-house legal departments.

Regardless of experience, all lawyers could consider how their area of interest might impact their career. Most State Bar associations offer accreditation for areas of specialization, which requires a certain number of years of practice in this area as well as passing a rigorous exam.  Veteran attorneys or those looking for a change might consider how additional certification could aid them. Becoming “board-certified” in a particular area can make you more attractive, especially to law firms who can then bill more per hour for your time due to this accreditation.

Marketability

For newly licensed attorneys seeking their first job, there are more opportunities in private practice with law firms than with in-house legal departments.  Although very large companies often hire new law graduates, the vast majority of companies are looking for attorneys with prior experience when they are making a hire.  A typical in-house role will require at least three years of prior experience, and sometimes much more.   Lawyers who have worked for a large law firm often are more sought-after by these companies than those coming from other in-house legal departments or smaller firms, as companies believes that lawyers often get better training and experience at these large law firms (although that is not necessarily the case).  In reality, lawyers working for smaller boutique firms have usually gained more hands-on experience, have taken on more responsibility quicker in both transactions and litigation, and generally worked closer with more senior attorneys on a day-to-day basis, providing more opportunity to develop and learn as a lawyer more quickly.

For this reason, it is often more advantageous to begin your legal career in private practice for several years, then make a move in-house. This provides the lawyer with an opportunity to learn and receive training in a more structured environment, surrounded by legal professionals, and become more marketability to hiring managers in in-house legal departments.

Opportunities for Advancement

Growth opportunities matter more to some attorneys than they do to others. If the ability to earn  substantially higher cash compensation as your career progresses is a priority, then private practice is a good route to take, especially if you have the ability and interest in bringing in new work and new clients to the firm. This is not to say there are no growth opportunities with in-house jobs.  Promotions, annual pay raises, bonuses based on company performance, equity grants, and other tax-preferred benefits that companies provide, all combined, can often result in in-house lawyers accumulating as high of a net worth or higher than a lawyer in private practice.

In Conclusion

Ultimately, the career decision between an in-house counsel and as a private practice attorney depends on several factors, including your preferences for work/life balance, desire for high cash compensation in your early years, they type of work you prefer to do, your areas of interest, and desire to advance and grow over time as an attorney.  While working in a law firm may offer a higher earning potential and growth, especially in the short-term, in-house counsel positions provide better work-life balance, tax-preferred benefits, more diverse work responsibilities, and allow the freedom from the pressures of billable hours.  As a young lawyer, it is important to assess your personal priorities and long-term goals to make an informed decision.

Categories: Career Goals, Go In-House, In-House Law Jobs

Jane Pollard

About Jane Pollard

Partner

A founding member of Momentum Search Partners, Jane manages all aspects of its operations, many of its client relationships, and also works a recruiting desk. She has successfully completed attorney searches ranging from executive-level general counsels and chief compliance officers to AGCs and compliance analysts for both for public and private companies, and has also placed attorneys at law firms. Jane obtained her JD with honors from the University of Texas and, prior to recruiting, was a commercial litigator in private practice with a large law firm and a CPA. She lives in Austin with her husband, who is also a lawyer, and spends her free time cycling and playing racquet sports. For questions, comments, or suggestions related to our blog, you can contact us via our website or visit Jane on LinkedIn.

Jennifer Nelson

About Jennifer Nelson

Partner

As a founding member of Momentum Search Partners, Jennifer has developed longstanding and invaluable relationships with both corporate in-house legal departments and law firms across the state of Texas. She handles complex searches that require deep industry knowledge and focuses on identifying high-caliber attorneys and compliance professionals. A native Texan and third generation Longhorn, Jennifer has two sons who followed her at The University of Texas. Jennifer lives in Austin with her husband a longstanding oil & gas attorney, and values her family, friends and faith. For questions, comments, or suggestions related to our blog, you can contact us via our website or visit Jennifer on LinkedIn.

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