Associate Salaries, Biglaw, Money

No, You Are Not Matching The Market: 1st Years To $180K Doesn't Tell The Whole Story

Just because first year associates are making $180,000 doesn't mean everyone is happy.

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Rich Businessman Poor BusinesswomanThe legal industry is having a moment. Firms across the country are rushing to raise associate salaries — the first raise in nearly a decade — leaving a perceived prestige gap between those firms that have matched the so-called Cravath or MoneyLaw scale. So if you are a partner in a firm that doesn’t have the financials, or the will of the partnership, to meet the new market scale, what are you to do?

A lot of firms are gaming the perception folks have by raising first-year associate salaries to the much ballyhooed $180,000 but putting the screws to the more senior folks. Take, for example, Reed Smith. Though they are not the first, nor will they be the last to employ this tactic, we sure have heard a lot of complaints from their associates. Last week they announced raises to first- and second-year associates to $180,000 and $190,000 respectively in major markets, but left the rest of the associates twisting in the “merit-based raises” wind. The reaction was immediate from the associates given the cold shoulder, and they were confident, consistent with past practices, they would be victims of compression, meaning their base salaries wouldn’t match the announced Cravath scale.

As one tipster noted:

I would suggest putting significant pressure on Reed Smith to address the issues of only guaranteeing first and second year increases and not addressing comp for third years and above. By only addressing first and second year comp, the mid level and seniors view the move as the firm obviously only being concerned with recruiting efforts and not retaining the quality level of experience of skill throughout the mid level and senior associates.

Salary compression is a very real issue, and firm management needs to address the issue. Firm associates are highly frustrated.

This tipster is very right — throwing out the $180,000 number seems to end the compensation inquiry for a lot of people. Take this law.com article which discusses the firm’s raise of first year salaries as part of the general trend of increasing associate compensation, without any mention of mid-level and senior associates’ compensation. The firm is even quoted in the piece, claiming the raises will “attract[] and retain[]” quality associates:

“These changes are aimed at attracting and retaining the strongest talent to provide the highest level of service to our clients,” the statement said. “As always, we look forward to providing the highest and best level of talent and service to our clients and believe that these changes will continue to enable us to do so.”

As we approach recruiting season, certainly the move will attract attention from rising 2Ls, but a word of caution. Make sure you thoroughly investigate the compensation structure of any firm you decide to summer at. There is a lot of data out there about every possible firm, and it is important you really understand whether you’ll be making market compensation as a third- or fourth- year. You don’t want to wind up bitterly calculating all the money you left on the table for turning down an offer from a rival firm that pays market salary for all associates just because you thought the managing partner had stinky breath during your interview. And a special warning for laterals, just because you make market salary when you lateral over, it isn’t a guarantee that will last forever, or even another year.

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We are covering this story as market conditions develop, so please drop us a line — text (646-820-8477) or email (subject line: “[Firm Name] Matches Cravath”) — when you know of another firm making a compensation move. Please include the memo if available. You can take a photo of the memo and send it via text or email if you don’t want to forward the original PDF or Word file. All sources are kept strictly confidential.

Reed Smith Raises Salaries, Matching $180K in Some Markets [Law.com]

Kathryn Rubino is an editor at Above the Law. Feel free to email her with any tips, questions, or comments and follow her on Twitter (@Kathryn1).

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