The legal industry continues to see salary raises for associates, with the most recent announcement coming from the top Biglaw firm, Reed Smith. Despite its impressive gross revenue of $1,417,599,000 in 2022, making it the 29th firm in the Am Law 100 ranking, the company’s new salary structure has raised some eyebrows.
In 2021, Reed Smith adopted the market standard salary for first-year associates, while the compensation for existing lawyers remained ambiguous as the firm reworked its salaries. Now, with effect from 1st July 2024, Reed Smith announces another round of raises, and once again, the salary of its associates remains “unclear”.
The firm’s latest compensation structure seems to divide the associates between the “A squad” and the “B squad”, based on their billable hours, raising speculation that this could be the industry’s first major billable-hours-based compensation scheme.
Reed Smith’s most junior associates, and those who bill 2,000 hours or more annually, will receive the standard Cravath match. However, for any associate billing less than 2000 hours, the “B scale” salary will apply, resulting in a reduction in compensation by several tens of thousands of dollars.
However, there is a silver lining. Associates in Salary Level B who manage to reach 2,000 billable hours in any year will receive a bonus equal to the difference between the B and A scales. Thus, Reed Smith’s new structure seems designed to incentivize high billable hours from its associates.
The takeaway message from this development is clear: Reed Smith is rewarding its associates based on their billable hours. Associates who can meet high billing targets stand to earn substantial salaries, while those who can’t might have to come to terms with earning less. Congratulations are due to those in Salary Level A; for those in Salary Level B, it appears that a tough road lies ahead.
Other firms in the industry are undoubtedly watching these developments closely, as the industry continues to grapple with the best approach to associate compensation, amidst increasing workloads and demands for better work-life balances.
Read more about the Reed Smith salary announcement on Above the Law.