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Law Practice Management

BigLaw Associate Pay Should Be Cut to $125K or Even $100K, Consultant Says

Posted Sep 8, 2009 10:53 AM CST
By Debra Cassens Weiss

Some big law firms are cutting annual pay for new associates from $160,000 to $145,000, but the cuts need to go deeper, according to a law firm consultant.

Writing at Cotterman on Compensation, one of the consulting firm’s principals, Jim Cotterman, says pay is still out of line, and it should drop to $125,000 or even $100,000.

Lawyer compensation will take a hit in other areas too, Cotterman predicts. He says signing bonuses are likely to be cut, benefits reduced and bonuses made more difficult to attain.

The impetus for the changes will be client demands, he says. “Services will be competitively bid, outsourced, offshored, converged, internalized, re-engineered, and even forgone." Add alternative fee arrangements into the mix, he says, which transfer risk to law firms. "All of this will bring the major line item in any law firm—the cost of people—under assault. This will affect total employment, wage scales and job expectations.”

Cotterman sees a bright side, however. As law firms create new bonus policies, they will define what it is they are seeking from associates, possibly creating multiple career paths. “Time to rethink up or out, tiered ownership and the array of tactics deployed over the past 20 years,” he writes. “The trade-off for associates—lower remuneration hopefully mitigated by better career development and opportunity.”

Comments

1.

J.D.
Sep 8, 2009 11:04 AM CST

Unfortunately, tuition does not look like it’s going to be cut anytime soon.

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2.

Esq.
Sep 8, 2009 12:23 PM CST

Gee, tuition is NEVER a concern when considering all the lawyers who start off in smaller firms, the government, or non-profits. 

$160k is roughly TWICE the starting salary for a mid-sized firm or the government.  BigLaw associates will have to make do with earning only 25% more than their bretheren.

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3.

Salescoach
Sep 8, 2009 12:46 PM CST

Cotterman is right, but incomplete. Everyone in BigLaw should plan to make far, far less than was usual.  BigLaw has permanently lost its pricing power, which means that the days of of 40% pretax profits are over. That means that senior lawyers grinding out 2500 hours/yr and making $1m plus are also over. Law will begin to look more and more like the corporate model, where partners are paid market salaries as practitioners, or salespeople (rainmakers), managers, etc. In addition, they’ll receive returns as investors, appropriate to the profitability of the enterprise. Across-the-board 7-figure earnings are history.

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4.

J.D.
Sep 8, 2009 12:50 PM CST

As someone who does work at a non-profit, I’m concerned that once it becomes the social norm to pay lawyers less, that norm will trickle down to all of us. It’ll be pretty difficult for a non-profit to justify paying you $80k a year when your peers at the “big firms” are making $100k. Likely, you’ll see a cut as well.

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5.

B. McLeod
Sep 8, 2009 3:33 PM CST

Or even $70K.  The firms should fill “associate” posts by soliciting competitive bids: “We have X number of positions, and persons with the requisite qualifications should submit competitive salary quotes.”  I doubt that they would have to pay many $100K salaries to attain acceptable staffing.  But, perhaps that is not wasteful enough to preserve the “we have money to burn (at our clients’ expense)” image.  Or, wait, I know.  It hasn’t been done before, so they can’t do it.  That is the “innovation” of large firms.

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6.

James
Sep 8, 2009 3:39 PM CST

Ya McLeod, that’s exactly what they should do.

Just think under this system, McLeod might become a Doctor making $7.30 an hour.

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7.

Associate
Sep 8, 2009 4:25 PM CST

Offering less than $100,000 for an associate is an insult!  I will not accept less when I get out of law school in two years!

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8.

Goodsharks.com
Sep 8, 2009 4:34 PM CST

Comment removed by moderator.

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9.

Biglaw Associate
Sep 8, 2009 8:10 PM CST

Why do people fail to understand that biglaw associates are paid what the market will bear?  160k is “reasonable” because the market has determined that it is.  Go ahead and pay $100k and see what happens—all the talent will leave (except for people from mediocre schools who couldn’t get anything else).

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10.

Recent JD
Sep 8, 2009 11:09 PM CST

I agree with Post 9.  Talent follows money.  Look at what happened to medicine and quality of healthcare.  Cotterman and those like him who manage to obtain prominent media coverage are the ones both fostering and legitimizing the drop in associate pay.  I would like to see what sort of debt he carries around from his undergraduate and graduate education.  160K is only absurd in the abstract.  When educational debt, taxes, cost of living in a major metropolitan area (that the firms paying this base are located in), and other daily expenses are factored in, the salary becomes reasonable for top legal talent. 

More food for thought:  Is paying a starting young associate the same salary as a 22 year old college graduate working as a 1st year analyst/banker really that out of line with the market?

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11.

B. McLeod
Sep 9, 2009 12:48 AM CST

I believe “the market” is redetermining.  Get ready.

Oh, and James, I’m really not worried.  There comes a certain measure of security in not charging vastly more than you’re worth to begin with.

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12.

Donald
Sep 9, 2009 8:02 AM CST

Talent does follow money, but the money comes from clients, and clients are no longer as willing to pay for the so called talent that has absolutely no legal experience yet still bills at over $400/hour.  We have to cut our in-house costs somewhere, and the biggest chunk of our costs come from overpriced and underexperienced associates who add no value to the work.  When faced with the choice of cutting our in-house salaries or demanding lower rates from outside counsel in order to reduce our budget, which do you think we choose?

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13.

Esq.
Sep 9, 2009 9:17 AM CST

@ #9:  I think you’re missing the fact that the market (i.e. the firm’s clients) will no longer bear $160k new associates. 

If BigLaw is offering only $100k, would-be associates either have to make do with that, or find elsewhere to work.  I’m still trying to figure out how BigLaw salaries even got to $160k.  When I started law school in 2000, they were between $100k and $120K.  How they’ve increased by about 25% since then (other than the bubble) is beyond me.  It’s definitely not due to a shortage of lawyers.

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14.

tom
Sep 9, 2009 9:38 AM CST

In order to get the best and the brightest ivy league lawyers to draft documents to allow the next Bernie Madoff scandal, we need to pay high rates or the firm across the street with get the next Madoff as a client.

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15.

Esq.
Sep 9, 2009 12:19 PM CST

Who chooses a law firm based on its first year associates?  If the firms really wanted the ‘best and brightest’ they would expand their incoming classes (even summer associates) and significantly weed them out in first or second year, with the survivors getting significant increases.  Instead, under the current system, someone who gets into an ivy league school or does well in first year can skate for 5-10 years on that accomplishment alone.

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