monopoly pay

Determining Compensation Levels for Law Firm Staff

Law firm leaders too often rely on precedent when making managerial decisions for their firms. A prime example of this is how they decide how much to pay staff members (and to a lesser extent junior lawyers). The most common mistake is to set compensation levels based on historical experience. For example, a law firm that previously paid a paralegal $20 an hour or a contact attorney $35 an hour five years ago will offer to pay that much now. In contrast to large corporations, law firms rarely conduct compensation surveys to determine what their competitors are paying. Thus, law firms are predisposed to miss changes in market wages. This is true for staff members who get paid by the hour as well as those who receive an annual salary.

There is a no-cost and efficient way to get a good sense of the current market for a specific position. Ask the candidates to provide their salary demands as part of the initial phase of the hiring process. In addition to asking for a resume, require candidates to specify how they want to be paid. Most candidates won’t provide salary information, and that is usually not disqualifying. It makes sense to interview qualified candidates even if they haven’t provided their salary requirements. In my experience, however, enough applicants do to provide such information to give the employer a rough sense of current market conditions.

For example, I recently worked with a law firm to hire a part-time paralegal. The firm received several dozen responses through Craigslist. Approximately ten candidates provided salary information. The responses fell into a typical pattern—the marginally qualified, the qualified, and the very experienced/over qualified. In this particular case, candidates without law firm experience were asked for $10-$14 an hour, those who possessed most of the requirements set forth in the job posting asked for $15-$25, and the most experienced/over qualified, which included several folks who had graduated from law school, sought more than $30 an hour. The advantage of this approach is that it allows the employer to see how much additional skill and experience is available at higher price points.

Over the past few years the market for lawyers with less than four years of experience who are applying for part-time or other non-partnership positions has changed dramatically. The market is such that lawyers will respond to jobs paying $20 and hour and sometimes even less. By contrast, paralegals continue to command the same hourly rates that they did a few years ago.

To be clear, the fact that it is possible to pay less for junior lawyers and staff members doesn’t mean that it is wise to do so. Paying low wages can be counterproductive because it increases turnover. Overall, however, there is no question that the ratio of available talent and what it costs has never been more favorable for law firms. It is therefore critical that law firms obtain current wage information and not guess or rely on precedent when setting compensation levels for staff and junior lawyers.