Kilpatrick Stockton announced Thursday that the firm will cut associate salaries by 10 percent, effective July 1.
Starting pay will drop from $145,000 to $130,000 in Kilpatrick's Atlanta and North Carolina offices and from $160,000 to $145,000 in New York and Washington, D.C., as well as for patent attorneys.
Kilpatrick's pay cut goes into effect exactly a year and a half after Kilpatrick and its Atlanta competitors bumped up starting pay from $130,000 to $145,000 with an across-the-board associate pay raise. The Jan. 1, 2008, raise was the third in two years.
The Kilpatrick pay cut affects all associates in the firm's U.S. offices, except for a handful hired since the beginning of the year, said Diane L. Prucino, the firm's co-managing partner. "The reduction was motivated by looking at what the market is doing," said Prucino. "It appears that a market correction is occurring."
Prucino pointed out that a number of firms nationally have cut pay this spring. "We fully expect additional associate salary reductions to occur locally," she said.
In mid-April, McKenna Long & Aldridge was the first Atlanta-based firm to reduce associate pay, cutting starting salaries by $20,000. McKenna uses a merit-based compensation system instead of raising salaries in lockstep by associate class or level.
The pay cut will save Kilpatrick 5 percent on associate salaries this year, since it is effective for the second half of the year. Prucino said Kilpatrick will re-evaluate associate compensation at the end of the year.
Associate pay under the existing scale ranges from $145,000 to the "low 200s," said Prucino. She did not give a figure for the savings to the 500-lawyer firm, which grossed $276 million last year, resulting in an average partner profit of $703,152, a 7.4 percent increase from 2007.
The firm has 200 associates, Prucino said. If there is an average annual savings of $17,500 per associate for a total of $3.5 million, the cut will save the firm about $1.75 million this year.
Associates will have a chance to make the money back in their bonuses, assuming they can bill enough hours. Prucino said associates will be eligible for year-end bonuses of up to 25 percent of their previous, unreduced 2009 base salary, plus the amount that they are losing with the pay cut. Kilpatrick requires its newest, level 1 associates to bill 1,900 hours and more senior, level 2 associates to bill 1,950. The firm bumped up its hours requirements slightly in 2007, after announcing the third and final round of raises.
Kilpatrick is also changing the dates of its associate evaluation year. Instead of ending Sept. 30, the evaluation year will end Dec. 31.
Besides Kilpatrick and McKenna, associate pay cuts have been reported at six other firms with Atlanta offices. DLA Piper, Womble Carlyle Sandridge & Rice, and Greenberg Traurig have cut associate pay by 10 percent. Seyfarth Shaw announced associate pay cuts of 5 percent to 20 percent. Thompson Hine cut nonpartner pay by $17,500 across the board. McGuireWoods cut starting salaries by 10 percent.