Why Latham’s New Salary Model is a Win for Senior Associates
September 24, 2022
There’s no doubt that 2016 was an exciting Salary year at Latham Salary & Watkins, and we’re excited to see what 2017 has in store! One thing’s certain: the lawyers at Latham will continue to be leaders in the legal field,
both in their field of practice and in their salary structure. Just today, Latham announced its updated salary model for all incoming associates and new hires beginning January 1, 2017, including an average 3 percent increase in base salaries.
What does this mean for me?
This new salary model will only take effect from January 1, 2018. The senior associate salary increase may look small at first glance ($1,000 more annually) but it has the potential to have a major impact on those whose salaries are closer to the new maximum level (senior associates who have been with the firm over 10 years).
For example, an associate who started in 2010 would see their annual salary go from $132,000 to $134,000 if they stayed with the firm through 2018.
With this announcement come many questions and concerns. Firstly, there will be no more fixed compensation which could potentially result in hourly wage cuts across the board – this means it might cost more in overtime hours to produce the same revenue.
What does this mean for everyone else?
Latham has done what many employers do when salaries increase: shift the burden onto employees.
For example, salary increases come with expectations that employees will perform higher levels of non-billable work. Such as going to firm lunches and dinners which can range from $75 to $200 each time or working outside their typical hours (i.e., 8 am-5 pm) which often does not get compensated, or even during lunch breaks.
This also means that junior associates (1-2 years out of law school) will be earning only slightly more than senior associates who are 8 to 10 years out of law school.
So, in a way, employers can get around raising salaries by shifting work off to junior associates and treating them like interns. Many employers are already doing it and there’s no reason why other firms shouldn’t follow suit.
Just last week I heard about one major firm having weekly meetings where their junior associates spent 1-2 hours talking about how they should be billable yet weren’t being paid as such.
Are there any concerns with the new model?
Salaries in law firms traditionally work on a tiered system with employees at the top earning more money per hour.
However, the concern that this new model might place lower-tier attorneys at an unfair disadvantage may not be valid. First, it does not apply to lateral hires (hires from other firms). Second, the majority of associates are promoted to senior associates which put them back into the category of having higher hourly rates than most non-lawyers in society.
Lastly, many firms use bonuses as incentives that give senior associates higher overall compensation as opposed to straight salary increases.
What are some of the other changes I should know about?
While the new salary structure may look like it will provide more income, there are some negative impacts to the shift that should be considered. With smaller starting salaries and bonuses moved up to one year of employment,
associate lawyers will feel the burn of their yearly decreases much sooner in their careers and are less likely to get ahead with other types of compensation packages.
This system might help build morale among junior associates who now have a bigger gap between themselves and senior associates, but it could lead to tensions among those higher up who see their pay decrease from what they had before.
Moreover, performance-based bonuses don’t always have an impact on employees as this new structure does; often, bonuses are unrelated to employees’ accomplishments and are instead given out when needed for recruitment or retention purposes.
How do I prepare to best succeed in 2018?
Preparing to best succeed in 2018? Here are some things to consider when creating your company’s plan:
*What are the key drivers of success?
*Who are the targets we want to reach?
*What will the target look like when we reach them?
*What, specifically, will be different about our approach?
*Do we need to change who does what or how it’s done (if so, who)?
*Are there any changes to the internal structure that might be needed if external structures need to be tweaked (e.g., change leadership) for success benchmarks to be met within a given time frame and budget?
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