Nationwide Pay Raise Cut Watch: NY to 141?
Earlier this month, there was some discussion in the comments about law firms possibly cutting associate salaries to cope with the economic downturn. The scenario sounded far-fetched — but maybe it’s not as far-fetched as some might have hoped.
Look, we aren’t saying that the sky is falling. There’s a world of difference between a law firm based in Fort Lauderdale, with 128 lawyers and extensive exposure to Florida real estate, and the giants of Biglaw, with hundreds of millions (or even billions) in revenue, profits per partner well into the seven figures, and diversified practices.
But still, nobody would call this good news. From the Daily Business Review:
Attorneys at Becker & Poliakoff are being hit with a 12 percent pay cut for the foreseeable future to help the real estate-dominated firm deal with a drop in profitability and delays in collections.Becker & Poliakoff is the first major South Florida firm to turn to its lawyers to make cuts to help it deal with the economic slowdown and real estate downturn. Other firms have trimmed staff jobs, including paralegals and secretaries, and cut back on other expenses to help cope with the economic landscape.
Alan Becker, the firm’s managing shareholder, informed attorneys and support staff about the pay deferment plan via podcast Wednesday. The cut took effect Thursday and affects only lawyers. No layoffs are expected.
So that’s the silver lining to the proverbial cloud. You’ve suffered a 12 percent haircut on your salary, but at least your job is secure.
We don’t know what the Becker & Poliakoff pay scale is, but we’re guessing it’s well below the $160K scale. Back in 2003, it looks like their starting salaries were in the $63K-$70K range.
But just out of curiosity, what would Biglaw salaries look like if they were trimmed in this manner? If a 12 percent reduction were applied to the first three steps of the standard New York pay scale, salaries would go from 160-170-185 to 141-150-163.
More discussion, after the jump.
As noted, Becker & Poliakoff is more exposed than most firms to the troubles of the real estate and credit markets. They’re based in south Florida, and they focus on real estate and construction:
The Fort Lauderdale-based firm specializing in real estate, construction and government law brought in $60 million in revenue last year, but clients failed to pay $2.5 million, or about 4 percent of total billings, Becker said, adding that it was the firm’s best revenue year ever.“Look at the economy out there,” Becker said. “We have a tremendous number of real estate developer clients, and many are hanging on by their fingertips. So what am I supposed to do? Tell them I’m going to cut them off instead of trying to work with them?”
One catty competitor doubts Becker’s explanation:
A managing partner speaking on condition of anonymity said Becker’s math does not add up.“In order to cut all lawyers compensation by 12 percent the problem must be bigger than a 4 percent reduction in revenue,” the managing partner said. “I believe he’s either off more now or afraid he’ll be off more later.”
The managing partner also said that it is highly unusual to cut pay to associates when the firm’s profitability is suffering.
If things improve, Becker hopes to make it up to them:
Becker said the pay cut would be lifted if clients begin paying again, provided the attorneys are still with the firm. He said he expects to pay the money retroactively to attorneys who stay with the firm.
The salary cuts don’t bode well for the future of the firm:
The Becker & Poliakoff cutback strategy is uncommon. When firms hit a rough patch they typically hold back partner compensation and borrow money — unless the problem is particularly acute. It is also rare for a firm to turn to associates to help keep the firm afloat financially. Typically that is a burden faced by partners who share in a firm’s financial ups and downs.
How do the associates feel? One might expect revolt. But at least one associate is okay with it (at least when he’s being interviewed, on the record, by the DBR):
Neil Schiller, an associate in government law and lobbying at the firm’s Fort Lauderdale office, said he is glad the firm decided to defer salaries rather than impose layoffs.“This is a family,” Schiller said. “I would rather take a temporary deferral than see a family member leave permanently.”
These are just excerpts. Read the whole article — which is quite interesting, in a depressing sort of way — over here.
Caught in Real Estate Downturn, Firm Cuts Attorneys’ Pay by 12 Percent [Daily Business Review]
(65) Comments
Comments
first to say biglaw blows. hard. bad. very bad. ughh. hate it. pay is good. but that's the only thing.
With Obama's tax proposals the pay cut may turn into a net benefit. AMT would be avoided. Your house may be spared when the peasants riot against the rich. You may even qualify for the lesser tax bracket of 50% instead of 91% on individuals over 150K.
Oh yeah - FIRST
fourth!!!!
crap, that was me at 10:58, thought someone would post in between. so i was a turd at third.
ATL helped push salaries to 160K. I wonder if it will now help drive them back down to 145K...
I am sorry for this but, Hell, I'll take it...
lat admits (correctly) that this information has bears almost no relationship to what big NY firms are likely to do...he then proceeds to sensationalize and imply relevance
nervous associates=hits...anything for hits
I'd take a pay cut any day over getting laid off.
Until this happens elsewhere, I'd like to think of it as a local/regional issue.
Clearly a combination of practice area and location issue. Real estate in Florida is like the bubonic plague of the middle ages.
You're an idiot if you say you'd rather look for a new 160k/year job than take a pay cut and stay at your current job. Your salaries are already inflated compared to the value of your work.
Brobeck went from an SF-leading $135K to market $125K, right before the implosion. Other than that, I can't recall a large firm cutting associate pay. In today's market, it is unlikely to happen. No firm that competes for top people can afford to known as a pay-cutter. Frankly, it makes more economic sense for the firm to fire an under-performing associate and make everyone else busier.
You're an idiot if you say you'd rather look for a new 160k/year job than take a pay cut and stay at your current job. Your salaries are already inflated compared to the value of your work.
I love how firms think people are all retarded. They are asking associates to take a pay cut so that partners can continue to make absurd money. Hilarious. I fucking hate law firm management. Associates drowning in debt are asked to take a pay cut so that partners can buy another BMW. Makes perfect sense to me.
The only reason they are doing this is because the demand for real estate associates in Florida is about as high as the demand for herpes. Otherwise, every fucking associate should leave this sinking turd.
Bah! From speaking to many CFO's at second tier firms, they are planning on having to do another associate raise in late 2009 or early 2010. Of course, some of them are also in the midst of planning lay-offs at the same time.
agree with 11:12. Florida is in a lot of trouble, and this firm was caught up in the mess. The rest of the country isn't doing great, but anything's better than Florida right now.
You're an idiot if you post the same comment twice within a few minutes.
Truthfully, a pay cut is much more welcome than "downsizing." Whatever.
You're an idiot if you post the same comment twice within a few minutes.
this firm is so tied to the imploding Florida real estate market that it can't be used as an example for even other biglaw Florida firms, let alone NY firms. Florida is more likely to 160 than NY is to pay cuts.
CALLING ROGER LOU
CALLING ROGER LOU
please translate. mooshi mooshi!
http://www.youtube.com/watch?v=1bDQl9ueNfg
FL is probably one of the worst markets in the country right now for real estate. This firm will be lucky if they don't have a few of their developer clients go BK this year and really leave them holding the bag. Associates there should be glad they still have a job. One of the dangers in working for a focused boutique.
CALLING ROGER LOU
You're an idiot if you post the same comment twice within a few minutes.
I hate getting legal news from msm but lat, where's the info? http://news.yahoo.com/s/ap/20080520/ap_on_bi_ge/blind_money
Startling how young the readership of ATL is. Anyone in this business during the 2001-2003 downturn (and moreover the early '90's) would advise that associates should be glad to have a job.
Miami Salaries:
Tier 1:
Boies Schiller, $165k
Tier 2:
Weil Gotschal, $160k
Tier 3:
Hunton & Williams, $145k
I asked my secretary and paralegal to take a pay cut so that I could by 3 new suits.
Miami Salaries:
Tier 1:
Boies Schiller, $165k
Tier 2:
Weil Gotschal, $160k
Tier 3:
Hunton & Williams, $145k
Hogan & Hartson, $145k
McDermott Will & Emery, $145k
Foley & Lardner, $145k
Tier 4:
Greenberg Traurig, $135k
Akerman Senterfitt, $135k
White & Case, $135k
Am I forgetting anybody?
There aren't enough "T"s for this one. . .
There aren't enough "T"s for this one. . .
12:26---I'd add Holland & Knight, Bilzin Sumberg and Morgan Lewis to the list of $135K's in Miami...
12:15.
Of course the atl kids are young. The median is not a 7th at Cravath or 5th year at Kirkland as they'd like you believe, but probably a 2L at GW or 07 at V100. No clue as to how firms actually work or anything beyond they're little geographical/practice sphere. And bad logic to boot.
Pay cuts would only happen after a) associate firings b) summer class reductions c) bonus elimination d) de-equitization of low prospect partners even.
If it happened, I'd be shocked. I'm not billing 2500 hours at half a grand per to make less next year than this year. I'd walk and so would my friends.
12:26---I'd add Holland & Knight, Bilzin Sumberg and Morgan Lewis to the list of $135K's in Miami...
Stroock Miami also pays $135K I believe...
This is a horrible idea. The firm is much better off cutting some deadweight by letting a couple underachieving associates go than cutting salaries across the board. All this will do is ensure that the valuable and productive associates will look for work elsewhere and the firm will be stuck with the underachieving associates. But I guess the idea is to make everyone feel good in Obama's new kinder gentler America.
12:45-
Jerry McGuire thought his friends were coming with him too. But all he ended up with were a goldfish, and a whiny single mother.
The FL firm here is cutting pay and deferring the reduction until things pick up (at which point they will pay the deferred amounts)
"The only reason they are doing this is because the demand for real estate associates in Florida is about as high as the demand for herpes."
You win the internet. Best comment ever on ATL.
Going along with the money theme:
http://money.cnn.com/2008/05/20/news/money_blind/index.htm?cnn=yes
!
http://www.thelawyer.com/cgi-bin/item.cgi?id=132882&d=415&h=417&f=416
Only 141 instead of 160 while fresh out of law school and not knowing anything? Cry me a river. I could see a rash of bankruptcies based on that.
So we could all be making less straight out of law school. And yet, somehow I doubt that schools will take that into account and stop increasing or even reduce tuition. Those bastards.
This would never happen at Cravath. Cravath material never takes a pay cut. In fact, Cravath is preparing a new mid year bonus for all associates just because it can. After all its Cravath or nothing.
"I'd walk and so would my friends." - Walk where? If you're already at Cravath then you don't need to worry. But most of the people at lower ranked firms that pay lower salaries and bonuses and would do things like in this article aren't exactly Harvard grads with appellate clerkships who can lateral in weeks to a higher paying firm. It's not likely they'd have anywhere to walk to in this economy. The job market is tight right now in my city even for federal clerks from random districts and lateral associates from top 5-20 schools.
if this firm was handling complex cross-border transactional work or bet-the-company litigation, this wouldn't be happening.
Is Cravath really that good or is it just mere puffery on the part of their small dicked waspy associates?
3:47: BOTH!
3:47: Just the second one. They are not that good. If you want a real white shoe firm: S&C, no question.
12:53,
That may be true if there were options out there for these associates. As I understand it, that is not the case in the Florida real estate market. These associates really have nowhere to go, even if they are top caliber, because the market as a whole is almost dead. However, I agree that the partners should be taking the cuts first, if they haven't already. This sure beats layoffs disguised as trumped up "performance based" cuts, which can have a significant detrimental effect on associates' careers.
EveRY bOdy PAniC!!
No competitive big law firm is going to reduce salaries--they'll decide who to cut and just let them go. When you drop salaries to try to hang on to everyone, other groups just take your best talent. Besides, with profits per partner of over $2 million at the top shops, many of these firms could practically take a year off and keep things going.
The firms that are screwed are the smaller players that had lower PPP to begin with. While no partner is going to leave Simpson if they think PPP will drop from 2.8 million back down to, say, 2.4 million, there are plenty of places that can't see PPP go from $800k to $400k. They are going to have tough choices to make.
Does anyone understand what B&P is? They do condo association law. I mean, in terms of Florida law firms, they're not exactly heavy-hitters. Yes, the RE market in Florida is in the crapper, but the reason it's hitting B&P so hard is that they are heavily tied to the weakest segment of the RE market.
Miami Salaries:
Tier 1:
Boies Schiller, $165k
Tier 2:
Weil Gotschal, $160k
Tier 3:
Hunton & Williams, $145k
Hogan & Hartson, $145k
McDermott Will & Emery, $145k
Foley & Lardner, $145k
Tier 4:
Greenberg Traurig, $135k
Akerman Senterfitt, $135k
White & Case, $135k
Holland & Knight, $135k
Strook, $135k
Morgan Lewis, $135k
Bilzen Sumberg, $135k
Am I forgetting anybody?
Does anyone know how Tampa salaries compare to Miami? I know they are lower but by how much?
Go to alreadybored.com or nalpdirectory.com to do a salary comparison.
this is a jump the shark type post
Biglaw associates are underpaid. The market leaders will move up again next February.
This is a bunch of ATL fearmongering and hype. This firm is almost solely dedicated to real estate. There are south Florida banks going under, for Christs sake. Everyone tied to SOFLA real estate is screwed.
None of the BIGLAW offices in SOFLA (i.e. Weil, White & Case) are mentioning paycuts. It's just a product of practice area.
As for Becker Poliakoff, couldn't happen to a nicer bunch of Condo Cammando attorneys..maybe they can't afford to drive out into other counties and put on "seminars" in the future......12% fewer seminars would be nice
As for Becker Poliakoff, couldn't happen to a nicer bunch of Condo Cammando attorneys..maybe they can't afford to drive out into other counties and put on "seminars" in the future......12% fewer seminars would be nice
Summer Associates to $4000 per week!
The odd thing about it is that with their condo practice, they should be making a windfall through their collections and foreclosures which is a high margin part of their practice; this really spells trouble..
Almost their entire West Palm Beach office quit yesterday. The firm's most profitable office, poof, it's gone. This firm is a sinking turd!