Associate Salaries, Money, Small Law Firms, Solo Practitioners

Back In The Race: Should There Be A Minimum Associate Base Pay At Small Law Firms?

If you are going to pay below-market rates, there should be a good reason why; citing a bad job market will only work for so long.

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resume girlThe big news this week is the Biglaw pay raises. I want to congratulate all of the attorneys who will be benefiting from this. Soon, property managers will raise rents accordingly, furthering the trend of major cities becoming unaffordable to everyone else. Finally, our good friends at the IRS also want to congratulate you as they will share (and share big) in your good fortune. While paying taxes is painful, take comfort in knowing that some of your money is being used to support your colleagues by keeping the IBR system solvent.

Unfortunately, there is no solo or small-firm equivalent of Cravath that sets the market for associate base pay. But in today’s job market, it is a race to the bottom. I previously covered the reasons why solos and smalls pay so little to their associates. They either don’t have the money or have the money but don’t want to pay it out. But nobody in SoloSmallLaw knows for sure what is an acceptable salary. We all just give our own stories of what worked and what didn’t.

So today, let’s talk numbers. What is an acceptable minimum starting salary for a new attorney? What do I mean by acceptable starting salary? An amount that allows someone to pay reasonable living expenses. An amount that does not make someone wonder why they didn’t get an MBA or go to clown college instead. An amount that keeps employees from browsing LinkedIn or Symplicity on their smartphone during lunch break when they should be browsing Facebook instead. Finally, an amount that motivates people to drink a smoothie instead of whiskey.

The acceptable number varies based on many factors, including location, competing salaries, the ability to bill out associate hours to clients at a markup, and the sense of entitlement of both the employer and the applicant. Over the years, I have heard of certain firms paying shockingly low amounts to their associates, but I will not publish them here because I don’t want to give them even a hint of legitimacy.

Cost of living analysis. One way to determine an acceptable salary is to pay an amount that would allow them to meet the living expenses in the area. Most young lawyers prefer to live alone (or with their spouse) in a nice starter apartment or house located in a safe part of town, just like you did when you graduated. They also need money for living expenses and student loans.

So let’s assume the following monthly expenses:

  • $1,500 – Rent with utilities
  • $100 – Phone
  • $400 – Average lease payment on a low-end BMW
  • $1,600 – Food, gas, insurance and miscellaneous
  • $1,200 – Student loan payment
  • $4,800 – Total

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If $4,800 sounds low, it is because I did not include other expenses, such as retirement contributions. I did not include that because small firms do not provide them or people would rather pay student loans with the money instead (which may lead to a better rate of return).

Also, keep in mind that the $4,800 is after-tax money. So in order for an employee to be able to meet the above expenses, an employer’s pre-tax pay would have to be around $7,000 per month (or $84,000 per year), give or take.

Many SoloSmallLaw employers might think this number is high and would suggest that young attorney should cut costs instead. But common sense dictates that if your job does not adequately pay your living expenses, you will eventually move elsewhere or do something else that does.

Comparative pay. Another way to determine an acceptable salary is to look at publicly available numbers in similar positions. Here are three similar positions that legal employers tend to look at:

Judicial law clerk. According to the OSCAR website, the base salary of a federal judicial law clerk is $51,811 plus the applicable locality rate. But these positions are very competitive and most are not applying for the money. They are doing it to get a chance to work closely with a federal judge and take advantage of the excellent career options once their term ends. Some state courts also have law clerk positions. But some of them are career positions with rare openings. Also, their exit options might not be as good as federal clerks.

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Government positions. The salaries of many government positions are publicly available. Generally, government positions pays less than a comparable position in the private sector. But there are other benefits to working for the government that can compensate for the lower pay, including PSLF, better benefits, reasonable work-life balance, and stronger job security, to name a few. The government generally has better training programs, although most are really interested in getting good government experience to take to the private sector.

Medical Interns/Residents. While medicine is a different world, a look at physicians’ initial salaries can provide some perspective on professional pay. According to Medscape, the average medical resident salary is $55,400, with a residency lasting anywhere from three years to eight years. There seems to be some variation depending on specialties, but it’s not much. I should note that almost all residents work in hospitals and many of them are tax-exempt 501(c)(3) entities, which qualifies them for PSLF treatment.

There won’t be a consensus on what is acceptable base pay for new attorneys in SoloSmallville. There are too many variables at play. But if you are going to pay below-market rates, there should be a good reason why. Citing a bad job market or lawyer oversupply is only going to work for so long.

Shannon Achimalbe was a former solo practitioner for five years before deciding to sell out and get back on the corporate ladder. Shannon can be reached by email at sachimalbe@excite.com and via Twitter: @ShanonAchimalbe.

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