Law Firms
Pay Cuts Accelerate at Law Firms Across the Country
Posted Jun 30, 2009 4:18 PM CST
By Martha Neil
News today that Schnader Harrison Segal & Lewis is cutting associate—and partner—pay is the latest in a series of announcements that seem to signal a seismic shift in the way well-known law firms are managing corporate law practice.
Even though the firm is on budget for the year, Schnader Harrison is chopping $10,000 from all associate salaries, and partners have also agreed to cut their own pay by 5 percent.
With the announcement, Schader becomes at least the fifth Pennsylvania-based firm to change its compensation scheme in some manner in recent weeks, according to the Legal Intelligencer. But Pennsylvania's legal market is hardly alone.
Firms across the country are implementing temporary and permanent pay cuts for associates, and in some cases, partners.
They include: Buchanan Ingersoll & Rooney; DLA Piper; Dorsey & Whitney; Drinker Biddle; Gray Plant Mooty; Howrey; Kaye Scholer; Kilpatrick Stockton; Pillsbury Winthrop Shaw Pittman; Snell & Wilmer; and Venable.
Last week, Venable revealed that associates will take a pay cut of 8 to 9 percent, effective July 11.
Why are so many law firms suddenly cutting attorney pay?
At least arguably, they can economize in this manner because of the difficulties many lawyers would face trying to find another job amid dismal economic conditions.
But the bottom line for many firms may be that this is a must-do if they are to compete effectively with other law firms that are cutting costs in order to retain corporate clients that are pressuring for more value for their legal representation dollar.
Additional coverage from ABAJournal.com:
How In-House Counsel ‘Value’ Challenge is Changing One Law Firm
Orrick Axes Lockstep Pay and Staffing, Amps Up Training in New Practice Model
As Law Practice Paradigm Shifts, Proactive Lawyers Consider Career Changes
BigLaw Firms Shudder as Rio Tinto Retains Legal Team in India
Updated on July 1 to add link to subsequent ABAJournal.com post.
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Comments
B. McLeod
Jun 30, 2009 7:14 PM CST
Or maybe the real bottom line is, when there ain’t no money, there ain’t no money. If clients won’t voluntarily continue to support wasting money like it’s going out of style, something (or someone) has to give.
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Jen
Jul 1, 2009 7:48 AM CST
Everyone is taking pay cuts across all sectors of the economy. Fine. Here is what troubles me: My biglaw firm has already frozen our salaries, eliminated our hours bonuses, and is about to announce pay cuts, but has still increased our hourly rates this year.
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A Lawyer
Jul 1, 2009 8:34 AM CST
HELLO: It has nothing to do with value to clients. The problem is profits are down and partners want to make more. Sure, they’ll take a 5% cut in salary - not in profit share.
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Raleigh
Jul 1, 2009 8:40 AM CST
Jen:
If hourly rates are boosted 10%, and business is off by 30%, this is like stanching the flow of blood, not making more money. BigLawFirm overhead is extraordinary, and the rent and equipment leases don’t go away for all those empty offices, iit just becomes a bigger number per head generating revenue. Sounds ike your Firm is doing everything it can not to lay people off. Payroll is usually the biggest dollar target expense capable of immediate elimination; sounds like your Partners are doing everything they can to avoid that, even risking Client satisfaction or attrition.
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cp
Jul 1, 2009 10:37 AM CST
Could it be that associate salaries at big firms are less a reflection of the associate’s legal ability and more a function of market demand? Right now the demand is low. Therefore salaries should fall accordingly. Those associates who don’t like it should put themselves back on the markets and see what it holds for them. I suspect employer interest will not match associate expectations. And why shouldn’t the partners take a profit? It is a business. In this environment, any company that didn’t use the economy as an excuse to shore up overhead would be exercising questionable judgment.
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hmmmmmm
Jul 1, 2009 3:50 PM CST
What if you are busier than ever with paying clients’ work but they still cut your salary?
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JN
Jul 1, 2009 5:25 PM CST
As a self-employed solo (yes I realize the redundancy in the identification), I never have to worry about a pay cut! Of course, when times are tight I make less, and there have been months when “less” meant less than expenses, i.e. negative income, aka a loss. If the business is making less, then it makes sense that the stakeholders receive less. And yes, even associates, paralegals, secretaries, and receptionists are “stakeholders.”
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Kalifornia Arnold
Jul 2, 2009 8:46 AM CST
The bottom line is that the partners want something (good legal work from associates with long hours)for nothing while making what they consider “sacrifices.” Being cheap and exploiting people is not only profitable but more in style ever these days it seems.
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