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What to Pay a New Associate?

I recently spoke with a partner at a small, but very successful law firm about his decision to hire a new associate.  The partner had identified a young lawyer he really liked, but that person was asking for more than the partner felt he was worth.

The question of lawyer pay is a tough one, and it’s easy to focus on one or two considerations, such as the increase in monthly overhead.  However, there are many more factors that must be considered when hiring anyone, and especially an associate who may not be as “proven” as an experienced lateral partner.

Below are some of the ways to determine the right compensation number for a new lawyer:

  • How much money can the new attorney make you? Paying a new associate $100,000 per year may sound like a lot.  But if the attorney can generate $250,000 in fees, that’s a great deal.
  • How much of your undesirable work can you hand off to this new lawyer? There is a lot of value in moving your least favorite tasks off your desk.  If a new lawyer – perhaps with particular expertise – can competently handle things you hate to do, that’s a huge win for your stress level and overall quality of life.
  • What if the new lawyer ends up being a superstar? It’s always easier to focus on the negative of the unknown.  For example, what if the new hire isn’t that good, or even worse, doesn’t work out?  But it’s also important to consider the opposite scenario.  If that new lawyer turns out to be a phenomenal asset to your firm, paying a little more will end up being one of your best decisions.
  • What are your other options? Do you have a stack of resumes from qualified applicants… or just a few?  How many other candidates bring the same level of skill, experience, and dedication to the position?  If you have very few equivalent options, paying more is probably the right decision.
  • What is the true cost of hiring someone for less? If you can pay less and get the same quality, skill, experience, and commitment, that’s obviously a win.  But it’s also important to remember that the wrong hire will cost you much more in wasted time, training, additional interviewing, and branding changes to your website, online profiles, and letterhead than the money you paid your first choice.
  • How painful would it be to compete against this candidate? Would it bother you if this lawyer went to a competitor firm?  If yes, that tells you a lot about how willing you should be to make them a member of your team.
  • Has the desire to win clouded your judgment? Negotiation is a good thing.  And seeing this candidate’s ability to successfully do it is very valuable.  But don’t let compensation turn into an “I’m going to win” issue which may cost you a good employee.  Afterall, you have the job to give – you’ve already won.
  • You can always undo a bad decision. What’s the worst that happens if you overpay for this employee?  If they don’t work out, you can fire them.  If they are good enough to keep, but should be making less, you can renegotiate their compensation or simply give less in annual raises until their pay aligns with performance.  Neither scenario is terribly harmful to your firm.
  • What does the extra money mean to you? e. Is paying a couple thousand more per month than you would prefer really going to impact you.  If you’re netting $150,000 a year from your practice, it may.  However, if you have plenty of money and aren’t going to miss another fifteen or twenty thousand over the next 12 months, don’t hesitate to pay more for the right choice.

Hiring is challenging because you’re always taking a chance on a person… no matter how capable or highly recommended they may be.  But in my experience, law firms almost always error on the side of paying too little as opposed to too much.  And in so many cases, that is truly an error.

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