Paul L. Caron

Sunday, August 8, 2010

Boston BigLaw Adopts Merit Pay for Associates

Boston Globe, Law Firms Rethinking Pay System:  At Many Hub Offices, Automatic Raises Are a Thing of the Past:

Boston’s top law firms are dramatically changing how they pay young lawyers, adapting to a changing market by adopting Wall Street-style compensation systems that rely on performance bonuses for large shares of annual earnings.

Major law firms have traditionally hired junior lawyers at six-figure salaries and awarded annual increases based on the number of years at the firm, a system known as “lockstep.’’ But several of Boston’s largest and best-known firms are telling associates that they no longer can count on automatic raises. Instead, they will receive salaries and bonuses based on how partners assess their performance.

Within the past year, Nixon Peabody and WilmerHale have each abandoned the lockstep approach in favor of performance-based systems, while two other firms, Choate Hall & Stewart and Edwards Angell Palmer & Dodge, are considering similar moves next year. About 400 Boston lawyers could be affected in these four firms alone, and many will ultimately earn less than they would have under the old system, according to law partners and legal recruiters.

Meanwhile, some firms are developing other ways to tie pay to performance. Mintz Levin Cohn Ferris Glovsky & Popeo earlier this year told associates that their salaries would be cut 15 percent if they failed to generate at least 1,500 billable hours. Bingham McCutchen in February adopted pay grades based on hours billed.

“The old lockstep is going by the boards,’’ said Walter Reed, managing partner at Edwards Angell Palmer & Dodge. “We will have a system where performance-based bonuses will be more significant than they used to be.’’

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