It’s been a long, below-market salary road for DLA Piper associates. For over a year now, DLA has been screwing around with associate salaries. Yesterday the firm announced that it would be moving back to a $160K salary scale — at least in New York — by 2011. (If you know of other firms that are finally moving back to $160K, don’t forget to send us an email.)
It’s taken DLA a long time to get back here. Back in May 2009, DLA cut associates salaries by 20%. That was ten percent more than other firms were cutting, and after a time DLA restored ten percent of the initial 20% cut.
But DLA wasn’t done, and a couple of months later, DLA associate salaries were back on the chopping block…
The next DLA cost cutting maneuver was the firm’s new merit-based compensation system. In December, on top of the already below market $145K starting salary, DLA instituted a deferred compensation system. The firm decided to withhold 15% of associate salary until the end of the year — and make the 15% tied to various performance measures. Arguably, the point was to make a larger portion of the DLA salary discretionary.
The firm rigorously defended the program, despite widespread associate outrage. But the argument really didn’t stick. As the market started to improve in 2010, reports surfaced that associates who could leave were getting out.
By April of this year, DLA was trying to backtrack. The firm raised starting salaries back to $160K. But there was still the problem with the 15% deferred compensation. It still left DLA associates underpaid as compared to their peers.
Finally, yesterday afternoon, DLA Piper told its associates that the firm would go back to paying market salaries. Not immediately, but eventually. Here’s part of the email associates received:
Last year, faced with unprecedented turmoil in the economy, we took numerous steps to reduce expenses and ensure that our firm remained strong and competitive. Our largest single expense is payroll, and savings in employment costs were key to our success in managing the firm through those tough times. The impact was felt at every level of the firm, including associates who experienced across the board reductions in pay…
The Associate Development Framework has been generally well received but one element, the variable compensation plan, has caused considerable concern among our associates. This element of the Framework was implemented with every intention of complementing our new system, which was designed to value and reward professional development more than the previous system that focused almost exclusively on billable hours. The Framework is too important to the success of the firm to allow one component of it to create a distraction and unnecessary tension. In recognition of this, we are also announcing that all associates who are employed on January 1, 2011 will be paid all of the 2010 “variable” compensation in their first pay of January, 2011. Beginning in January, 2011, associates will not be subject to a variable component in their compensation; base compensation will be equal to target compensation.
So there you go: In January 2011 DLA Piper associates will once again be making market rates. A tipster puts the salary “schizophrenia” into perspective:
They’ve decided to get rid of their whole deferred compensation plan. So an associate starting in Fall 2008 has gone from 160 to 130 to 145 to 130 (with a chance to get 15k back) to 145 (with a chance to get 15k back) to 160 again. All within the span of 13 months. If that doesn’t spell mismanagement, I don’t know what does!
Withholding the rest of their 2010 compensation until 2011 still rankles some associates who have spoken to Above the Law. If DLA is going to pay out all the deferred compensation regardless of performance, then why not do it now instead of keeping people on the hook until the end of the year? After all that’s gone on, some people see the move as an attempt to force DLA associates to stay through the end of the year instead of getting out of the firm when they have an opportunity.
Still, heading into fall recruiting at least potential DLA hires now that they won’t be shortchanged by the firm.
Restoring the deferred compensation (eventually) will not change DLA’s general commitment to merit-based compensation. A firm spokesperson told Above the Law:
We remain committed to merit based compensation. The only change was in comp as announced. No other change.
What has DLA Piper achieved with all this experimentation in associate cost cutting? Does the money the firm will save between May 2009 to January 2011 make up for the bad feelings and bad perception the firm has generated over this time?
One thing seems clear: the firms that drastically cut associate salaries back in 2009 overreacted. There were a number of firms that didn’t cut salaries at all. And here we are, a year later, and $160K is still the Biglaw market starting salary for top lawyers in Manhattan. Have a few firms still not gotten that memo? Let us know.
Earlier: Nationwide Salary Cut Watch: DLA Piper Joins the Party
DLA Piper Gives Back 10% of the Salary Cut
DLA Piper: Killing Lockstep Follow-Up
DLA Piper: Taking the Merit Based Model Out for a Spin
DLA Piper Ends Experiment With Low Salaries