The End of Associate Raises; the Beginning of Performance-Based Pay?

[WSJ_law_blog]

Did Williams & Connolly’s push last year to $180,000 for first-year associates signal a market-top?

According to a report just put out by Legal Times, it looks that way. “Instead of triggering another salary boom—one that might have pushed first-year associate pay through the $200,000 barrier—the Williams & Connolly increase appears to have ended a three-year salary streak for Big Law associates,” writes Legal Times.

Given the market turmoil, lawyer layoffs and at least one law firm dissolution, the end of associate pay-hikes shouldn’t come as much of a surprise. What’s worth considering, though, is how a depression (do we call it that yet?) in firm business could impact associate lifestyle (dare we call it that?).

As Legal Times notes, “If anything, associates may have to work harder for their money. Legal consultants predict a sharp drop in profits for many firms over the next year, and with associate pay hikes adding costs to the bottom line,” — pay hikes added $1 billion to 2007 law firm overhead, according to AmLaw — “partners are going to be pushing harder for more hours.”

Some are also pushing for a move to performance-based pay. McGuireWoods, for instance, is keeping market-rate pay for first- and second-years, but moving to performance-based pay for mid- and senior-level associates. “There’s a difference between someone who is doing just OK and someone who is doing really great work and that difference is not just a couple of thousand dollars,” says Thomas Cabaniss, managing partner of McGuireWoods. (Last week, Above the Law reported that Wilson Sonsini is moving to performance-based bonuses, or, in the words of a firm memo, a “bonus program focused on qualitative performance factors.”)

Howrey, notes Legal Times, is also close to launching a pay system “that will attribute salary increases to performance.” Robert Ruyak, Howrey’s managing partner, said associates who don’t meet performance and competency standards will be counseled by the firm. Then, he says, if performance doesn’t improve, the firm’s recruiters “will help them find another place that’s a better fit.”