Salary Cuts

Kaye Scholer: Back to More Simple Methods for Cutting Salaries, Plus a Big Time Bonus

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After being inundated with firms that are trying to cut salaries through the implementation of a merit-based associate compensation structure, it’s refreshing to see a firm cut salaries the old fashioned way. Tipsters report that Kaye Scholer is just going about its paycut in a straightforward manner:

Associates will be paid on a 145K scale for 11 months, and then, provided they are above some level of hours, will have a “keep what you earn” December.
This comes months after Kaye Scholer told half the class they would be making 60K and doing pro bono work for the first year.
Kaye Scholer’s got them by the balls and knows it.

Clean, crisp, this is how your father taught you to cut costs.
Remember, Kaye Scholer cut salaries and then offered a similar clawback provision last year. But our tipsters report that the hours requirements are far from onerous. If you hit 1600 hours by the end of the year, you’ll get your $160K.
The system has the feel of a DLA Piper-esque 10% salary holdback. But, unlike DLA, making the money back is tied to objective factors (hours) instead of subjective ones. And Kaye Scholer won’t be grading on a curve.
And, for 2009, Kaye Scholer will be making a bonus payment that is above the market for associates that hit their hours. More details after the jump.


As the tipster noted, it is pretty interesting that the firm is cutting first year salaries just months after splitting the class into two groups. In October, the firm announced that the entire first year class would start on time, but half of them would be working exclusively on pro-bono projects. At the time, I wrote:

One group will work for the firm’s paying clients and get paid the normal first year starting salary. The other group — roughly half of the class — will work exclusively with the firm’s public interest group and will make $60,000.

But it’s not all bad news at Kaye Scholer. At a firm wide meeting this evening, Kaye announced its 2009 associate bonus. Sources report that the bonus is very nice. Regardless of what class you are in, if you hit your hours, the Kaye Scholer bonus range is between $20,000 — $40,000. Bang. Put that in your pipe and smoke it, Cravath first years. Up to 40 grand is a nice payout.
(Of course, I’m sure Cravath associates that received a bonus regardless of hours are still pretty happy with how things turned out.)
Way back in 2008, Kaye Scholer was one of our earliest case studies for stealth layoffs. But since then, the firm has been pretty upfront about its actions: both in terms of layoffs and now pay. It’s nice to see. Honesty — and market busting bonuses — are great policies.
Earlier: Kaye Scholer: Splits First Year Class into Two Groups
Nationwide Pay Cut Watch: Kaye Scholer Lowballs Low Billers

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