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Milbank's uncharacteristically early associate bonus announcement demonstrates just how competitive the war for talent has become and raises concerns that law firms and their clients will suffer from the continued arms race over salaries.

On Thursday, Milbank chairman Scott Edelman announced that the firm's first-year associates would take home a $15,000 end-of-year bonus, while senior associates on the upper scale would receive a $100,000 bonus.

Milbank's announcement is the earliest in recent memory, coming a week before Cravath, Swaine & Moore's already-early Nov. 19 bonus announcement in 2018. Given the fierce competition for talent, many who work in the industry are not surprised.

"The market for sought after talent is more competitive than ever and that causes firms to look for an advantage wherever they can find it," said Zeughauser Group consultant Kent Zimmermann. "I would not be surprised if the date moves up more."

Coming out as the first mover in salary and bonuses sends a signal to the firm's attorneys and the external lateral pool that Milbank is in great financial health, said Harvard law school professor Scott Westfahl.

Being the first to announce also boosts name recognition—an important currency in a law school ecosystem where students have to make their employment decisions before their second year, he said.

Milbank has already garnered some name recognition at Harvard, Westfahl said, given the six years the university and firm have collaborated on the associate training program he oversees: Milbank@Harvard. But it took last year's market-setting associate salary announcement to get widespread attention from Harvard students, and now he hears the firm mentioned by students more than ever.

"I think that the student recruiting market for new hires is such that students have very little time to evaluate firms," Westfahl said. "If you've heard of a firm, then you have a lot more confidence that it's a solid place to interview."

Milbank did not explain the reasoning behind the early announcement.

While Cravath has invariably matched or set the market pay scale for associate bonuses, the firm has been mum on its own bonuses this year. Paul, Weiss, Rifkind, Wharton & Garrison and other white-shoe firms also have yet to state their bonus plans.

But the expectation is that in their own time, top firms will match Milbank's bonus structure. And a growing chorus of experts have denounced the constant arms race over salaries as both tone-deaf to clients and profit-strangling to firm finances.

First-quarter data published by Citi Private Bank and Thomson Reuters found that last year's round of associate salary raises had a hand in driving up costs by as much as 6.5% as demand slackened. Reuters' most recent report, which aggregated three quarters of data, found that while demand has increased, costs have continued to grow as well.

Estimates indicate the cost of the last associate salary hike may run as high as seven figures for a large firm like Milbank, and corporate clients have made it clear they aren't happy about the yearly raises, as the cost is often passed along to them in the form of higher billing rates.

"Everyone wants good talent, but they're overpaying and it creates consequences for the rest of the firm and is usually felt by clients in the form hidden costs," said Corcoran Consulting Group principal Tim Corcoran, who advises large law firms on their compensation systems.

There is some indication that common wisdom may be shifting. A report by the National Association of Law Placement found that many firms declined to follow the $190,000 market-leading salary set by Milbank last year. Firms such as Greenberg Traurig and Reed Smith have moved away from competing in salary brinksmanship, opting to focus on talent development instead.

Reed Smith, for example, ignored Milbank's $10,000 increase to $190,000, citing the "interest of its clients." Instead, the firm announced a new slate of perks for its attorneys, including changes to the firm's billable hour policy, a continuing education track and an internal recognition program.

But in the end, money talks, and few hold onto the illusion that the salary war will go extinct in the near future.

"It would be nice if that could be avoided this time and firms can hold the line," Zimmermann said. "But I don't have a lot of confidence that that's going to happen."

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