The future of associate pay
Before the recession, graduate starting salaries grew at a rate that considerably outstripped inflation. When the demand for legal services dropped, law firms moved to protect partner profits by laying off staff, reducing overheads, cutting compensation, lowering recruitment and deferring starting dates.
As clients felt the economic pressure, they began resisting the use of first- and second-year associates on their matters, with value and efficiency becoming primary considerations.
In order to operate successfully within this new economic environment, firms will have to set aside the traditional model of pegging pay and promotion on class year experience. They should be flexible enough to promote associates as warranted or needed, and to pay according to skills and competencies.
The model proposed here, under which a firm could defer promotions if it does not perceive a need for a higher level of associate in a given office or practice area, makes the associate the bearer of market risk.
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