Pa.-Based Law Firms Weigh Options for Raising Associate Compensation

Pennsylvanias Am Law 100 law firms are feeling pressure to compete with the emerging standard for employee compensation after Milbank and Davis Polk & Wardwell created a new market standard earlier this month.

Companies with lower profit margins have raised concerns about their ability to stay competitive with an emerging industry standard that already tops $ 200,000 as a starting salary, and the impact that standard could have on employee wellbeing.

Two Pennsylvania companies on the Am Law 100 – Dechert and Morgan, Lewis & Bockius – have publicly approved a raise in line with the market leaders. Both are in Am Law 50 with sales of $ 1.07 billion.

In an internal memo dated June 11, Dechert said it was in line with Davis Polk’s increased salary scale. Morgan Lewis followed suit, confirming on June 17 that it would keep up with its rival. As of July 1, the starting salary for Dechert and Morgan Lewis employees for the first year is $ 202,500; $ 205,000 for the second year; $ 215,000 for the third year; $ 240,000 for fourth graders; $ 275,000 for the fifth year; $ 305,000 for sixth graders; $ 330,000 for Seventh Year; $ 350,000 for the eighth year; and $ 365,000 for the ninth year and beyond.

Each company confirmed these numbers through spokesmen, although they did not want to comment on the story.

Reed Smith, who sits 26th on the Am Law 50 with 2020 sales of $ 1.31 billion, declined to comment on any adjustments to employee compensation. In a prepared statement, a spokesman for the global law firm said it had been reviewing its employee compensation structure ahead of the recently announced salary increases.

The spokesman said Reed Smith is “committed to a compensation and compensation structure that will attract and retain the strongest and most diverse legal talent, including the announcement of special spring / fall bonuses in April of up to $ 64,000 for 2021”.

Other Pennsylvania law firms in the Am Law 50, including K&L Gates and Troutman Pepper Hamilton Sanders, did not respond to a request to comment on their reaction to the associate talent market for this story. Faegre Drinker Biddle & Reath, also at Am Law 50, declined to comment.

In the bottom 50 of the Am Law 100, Cozen O’Connor said it hadn’t announced any salary increases this month, but a company spokesman said it would do so shortly. Ranked # 71 on the Am Law 100, the Philadelphia-based company had total sales of $ 530.9 million last year.

Duane Morris, # 75 on the Am Law 100 ranking, said it made adjustments to employee compensation ranging from $ 10,000 to $ 25,000, “depending on several factors, including law school graduation, geography, and more of the field of activity “. The company had total sales of $ 526 million last year.

Ballard Spahr declined to comment on adjustments to its employee compensation structure for this story. Ranked # 91 on the Am Law 100, the firm’s total revenue for the past year was $ 427 million.

In a prepared statement, Ballard Spahr’s chairman, Mark Stewart, said the Philadelphia-based law firm will respond in a manner that recognizes the competitive landscape, while respecting the mental wellbeing of employees, and providing opportunities for employees to be on a path in Direction to grow partnership.

“While hiring and retaining top lawyers is important to any law firm, decisions about significant pay increases for employees are not made in a vacuum. They affect other organizational priorities, ”said Stewart. “Increased employee compensation must be accounted for in such a way that unintended consequences for other aspects of the business are avoided, including higher job expectations for our lawyers and increased pressure on the law firm to raise tariffs.”

Others in the lower half of the Am Law 100, including Blank Rome and Fox Rothschild, declined to comment on this story.

Some business leaders are skeptical of recent wage increases.

Echoing Stewart’s concerns about employee hourly needs, another Am Law 100 firm leader who asked not to be named for this story said competition to attract and retain talent is driving companies to do so Paying too much entry-level salaries and at the same time increasing the pressure employees are exposed to in order to advance in the company.

“I think it’s a lot of mannequins and it’s going to put employees in a bad position with huge targets on their backs if they don’t bill a certain number of hours,” the company director said.

For Brad Hildebrandt, Chairman of Hildebrandt Consulting, who works with major law firms in the region, the recently announced salary increases come as no surprise. He said it was “inevitable” that more companies will raise salaries for their employees in the coming days based on the economic conditions created by supply and demand, particularly the high demand for talented employees and limited supply of candidates .

Hildebrandt said law firms wage bidding wars about every five years to compete for talent, and the series of announcements that started with Milbank is no different. The last major rise in the Big Law salary scale was in 2018.

“Whether it will be $ 200,000, $ 210,000, or $ 205,000, who knows, but it’s completely predictable,” said Hildebrandt. “How many companies will follow and how long will it take? It’s just a matter of time and it follows the same route every time it climbs. “

Legal industry leaders in the region say midsize businesses in big cities will feel competitive pressures as they compete with big law for associates.

“Those peaks in hiring young attorneys always lead to more peaks, at least for the next year or so, and sometimes it seems like an Am Law 100 thing bragging about rights rather than a solid economy,” said Matt Haverstick. managing partner of Law in Philadelphia company Kleinbard.

Haverstick said salary increases will put pressure on midsize companies like his, which tend to be looking for white-shoe employees and big law firms in Philadelphia and New York. Kleinbard reviews his compensation model every year to keep up to date with offers from regional competitors such as Morgan Lewis and Dechert.

“When an employee whose primary focus is maximizing computing looks at us and looks at Dechert and Morgan Lewis, we need to have compelling arguments as to why that person should stay,” said Haverstick. “Part of that equation has to be some degree of equality of numbers. I see the pressure on medium-sized companies. “

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