Merit-Based Associate Pay May Be a Money Saver for Law Firms
Nearly 30 large law firms have replaced lockstep compensation for associates with merit-based compensation, a system that will likely produce some winners and losers.
Law firms may save money under the new system, the American Lawyer reports, but associates may take a hit. “Coming after a year when many firms conducted layoffs disguised as performance reviews, trimmed salaries, and hacked bonuses, these new systems appear to be one more way for firms to cut associate pay,” the story says.
Firms that want to save money can simply promote fewer associates to the next tier, the American Lawyer says, “and nobody will be the wiser.”
Orrick, Herrington & Sutcliffe adopted its merit-pay system last July. Associates can choose between partnership track and a nonpartnership track with starting pay of about $80,000, according to the story.
Orrick chairman Ralph Baxter told the American Lawyer he expects to save money under the new system, for a couple reasons. Work will be sent to the lowest cost lawyer capable of doing the work. And the percentage of associates on the higher-paying partnership track is likely to drop. “This is about long-term alignment with everything that is happening in the world,” he told the publication.
