Compensation issues are particularly vexing for solo and small firm practitioners. In addition to setting an initial base compensation figure, practitioners must deal with the inevitable exponential growth of that base (as well as employer FICA and Medicare tax contributions, workers compensation and state disability costs) as time passes and tenure increases.

A practitioner also must consider the initial and rising future expense of added "perks," such as medical insurance, professional association fees, CLE costs and retirement benefits. Before making an offer to any candidate, a firm must establish exactly what the cost to the firm will be for the total compensation package.

It must then consider if the growth of firm revenues will cover the cost of the growth of the compensation package. While this article deals with hiring attorneys, these considerations should be given to the hiring of both legal and support staff, as well.

The first step in determining the initial base compensation figure for a newly hired attorney is to determine the "going rate" in both your geographical area and in your particular area of practice. Base compensation figures can differ dramatically depending on the firm's practice area. For example, an attorney in the intellectual property area may demand higher compensation than an attorney entering another field because of the higher demand for intellectual property practitioners in the current job market.

Sources for assessing the "going rate" vary. There are numerous national and regional survey groups on attorney compensation, such as Robert Half Legal and Altman Weil Publications, which provide summaries of attorney salaries by geographical and practice areas and can be helpful. However, the most valuable source of compensation information is often found at the local bar association, where areas of practice are usually represented in practice committees. Personal contact with members of those committees often provides the most reliable source of information on both the initial total compensation package, as well as future increases.

Too often, the real cost of perks can be overlooked by both the candidate and the hiring firm. The cost of medical insurance coverage and retirement benefits are the two most costly, and must be factored into the compensation package. They also can be negotiated with the candidate. It is important to remember that not every candidate has the same interests and concerns about benefits. If a candidate has medical coverage through a working spouse, the candidate may opt to waive that benefit for another, such as a retirement benefit or the cost of bar association memberships and CLE costs. It is therefore important to determine in the initial interview what the candidate's priorities are.

It is equally important for the hiring firm to know the cost of all benefits offered, both at the initial hiring stage and thereafter. For example, if the attorney is entitled to participate in the firm retirement plan, as his salary increases, the firm's contributory obligation will increase as well. This type of increasing expense is seen in other perk areas. The cost of bar association dues is often dramatically reduced for newly admitted attorneys. However, in a few years, that cost may rise by several hundreds of dollars per association. The cost of CLE credits have similar adjustments. As for medical insurance, the newly hired attorney may only require individual coverage, but may need family coverage in the future. The firm must determine, what, if any, additional contribution will be made to that coverage.

It is critical for hiring firms to have a written policy as to perks so there is no misunderstanding on the part of the candidate. This also will enable the firm to calculate the cost of the initial hire and project future costs. It is also important the candidate understand the cost to the firm of these added perks when the candidate is hired, as well as the increasing cost of the perks over time. This can best be done during a compensation review. Any adjustment in the base compensation figure should also take into account the rising cost of the perks provided.

PAID VACATION

An often overlooked perk is paid vacation time. The firm must remember that not only is a salary being paid during an absence, but the firm is losing the attorney's billable time as well. Therefore, the firm might consider paying attorneys for time not taken. Whether or not to allow the attorney to carry over unused time is a matter of firm policy and finances.

Firm policy and finances will also dictate whether a bonus will be given and when. More firms are moving toward "performance based" bonuses, either based on billable/collectible hours, or on revenues received. Some such bonuses are automatically given with the generation of a new client by the hired attorney, wherein the attorney shares in a portion of the ultimate fee generated.

And attorneys should be given the opportunity to make changes in the composition of their compensation packages as longevity increases. Medical insurance coverage which is no longer needed might be traded off for association dues and CLE credits, or other perks, such as vacation time or a higher bonus, if the cost to the firm is the same. An attorney is therefore able to obtain a benefit really needed or desired, at no extra cost to the firm.

To be competitive in the hiring market, compensation packages must become more flexible and considerate of an attorney's current and future needs. Such flexibility enables the hiring firm to provide choices, while maintaining control of the cost to be allocated for the total compensation package.

Florence M. Fass is a senior partner at Fass & Greenberg in Garden City, N.Y.

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