Biglaw Firm Matches Cravath... But Are They Cutting Associate Compensation While No One's Looking?
Sure, they're giving the same bonus, but lawyers are feeling the pinch elsewhere.
Simpson Thacher is matching this year’s Cravath’s bonus structure. That’s not particularly surprising. STB always joins the critical mass. Even the one year they tried to kick off the bonus season and got one-upped, they eventually adjusted bonuses to match the consensus.
The point is no one thought Simpson would short their associates on the bonus front. But when you dig a little deeper — behind what most lawyers bother to notice — the firm is reducing associate compensation elsewhere.
But first, the bonuses. The amounts, as discussed, are standard:
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Class of 2017 — $15,000 (pro-rated)
Class of 2016 — $15,000
Class of 2015 — $25,000
Class of 2014 — $50,000
Class of 2013 — $65,000
Class of 2012 — $80,000
Class of 2011 — $90,000
Class of 2010 — $100,000
Class of 2009 — $100,000
Simpson’s bonuses will be distributed on December 29.
But what has a number of Simpson attorneys concerned is another policy announcement from the firm. Effective January 1, the firm is instituting a number of changes to its health plan that will take more out of lawyers’ pockets every month.
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High-deductible plans are always troubling because they bring indirect discrimination into the system. They take away all the advantages of joining a risk pool and shunt responsibility for the downside risk back onto those who actually need the help. A naturally healthy family gets to pocket more money than the one with a poor kid suffering from some nagging childhood disorder. Or, say, a young and healthy associate who develops a rare heart condition suddenly pays a hefty chunk more because they lost the lottery of fate.
But high-deductible plans are generally cheaper, so younger associates tend to like them without thinking through the implications. However, there’s more here than meets the eye. From a tipster:
Next year, we will shift from a zero-deductible plan to a high-dedictable plan, but associates will still need to pay a slightly increased premium. The firm will be saving tons on it’s contribution to the premium (several hundred per person per month)
That’s a rare combination — higher deductible and a higher premium! Obviously the premium overall is reduced under a higher-deductible plan, but it looks like Simpson is shifting more of the contribution onto associates — reportedly to the tune of roughly halving the firm contribution — resulting in higher out-of-pocket payments for the employees. Fantastic!
In 2017, the semi-monthly employee contributions for the basic health plan — that did not sport the high deductible — were $172.62 for singles, $379.76 for couples, $310.71 for the employee and a child, and $474.70 for a family. Next year it will be $181.48, $399.24, $326.66, and $499.06. That’s not a tremendous increase, but that’s a couple hundred bucks out of pocket every year for decidedly less coverage than the employees got in 2017. And, obviously, without considering that everyone now has to save for the possibility of paying a big deductible.
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One of my editorial colleagues brushed off this concern by reminding me that Simpson associates are still making healthy salaries and can afford this modest dig into their semi-monthly paychecks. There’s some truth to that, of course. But lawyers don’t have as much disposable income after servicing their law school debt as their advertised salary might suggest.
And the point remains that reducing associate compensation, by whatever amount, matters in the fiercely competitive world of Biglaw recruiting. The firms have taken such pains to be able to advertise to recruits that “we’re all the same” when it comes to compensation. But underneath the sticker price of a $180K salary, the firms do have distinctions.
Law students and associates should be cognizant of the role health insurance pays in their compensation. Because that’s exactly where a savvy firm will try to futz with comp.
What do you think about these bonuses? Feel free to let us know by email, text (646-820-8477), or by tweet (@ATLblog). We might update this story by quoting your comments — anonymously, of course — if they’re insightful or amusing.
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Check out the bonus memo on the next page.
Joe Patrice is an editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news.
