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In the first significant associate pay hike in Texas since the heady days of 2000, Thompson & Knight will raise associate base salaries in January, a move that might signal the start of another paycheck bonanza for associates. Peter Riley, managing partner of Dallas-based Thompson & Knight, says the 370-lawyer firm recently decided to increase the base salary for first-year associates to $115,000, up from the current $105,000. The graduation bonus of $5,000 and signing bonus of $5,000 remain the same for first-years, Riley says, so the starting salary package jumps to a total of $125,000, effective in January 2005. Thompson & Knight also adjusted base salaries for more experienced associates, he says, but he declines to reveal the firm’s new salary chart. He says the new pay plan eliminates some compression that had developed in the upper levels. While boosting the money it will pay associates, Thompson & Knight also adjusted its billable-hour requirement, he says. First-year associates will be expected to bill 1,850 hours in their first full year of work — calendar year 2005 for associates who start work this fall — and the requirement for all other associates will be 1,950 hours, Riley says. Currently, all associates at Thompson & Knight are required to bill 1,900 hours. Significantly, he says, the firm also is moving from an hours-based bonus plan to a discretionary one. “We had an hours-driven bonus system, and we decided that was not the best system for associate development, or for client service,” he says. “If it’s hours-driven, people do what you measure.” Riley says Thompson & Knight hopes the new salary scale will aid in recruiting. “We just want to be a leader in getting the best people,” he says. Riley says the changes are aimed at making Thompson & Knight’s compensation competitive with Texas firms paying the top of the market through discretionary bonuses. “What we did here was move everything up to where we think the par is …,” he says. “It was designed to meet the top of the market and get away from all of these hours-driven incentives.” Associates were informed of the new pay scale in late June, he says, and law students considering offers from the firm will know about the new, higher pay scale. DIFFERENT ECONOMY The pressing question is whether other major Texas firms will follow Thompson & Knight’s lead in bumping up base salaries. Riley acknowledges that the base salary isn’t the total story and the firm’s overall compensation for all associates has been a little behind other BigTex firms. It’s been more than four years since associate salaries saw major hikes, in a free-for-all led by California firms during the technology boom. In January 2000, Silicon Valley firm Gunderson Dettmer Stough Villeneuve Franklin & Hachigian raised starting pay for its first-year lawyers to a guaranteed $145,000. That move started an avalanche that spread to major markets across the nation. It didn’t take long back then for higher salaries to hit Texas. In January 2000, Vinson & Elkins, based in Houston, raised base salaries by 10 percent, increasing the base for first-year lawyers to $86,000 from $78,000. But by February 2000, Andrews Kurth upped the ante by raising associate base salaries by 20 percent across the board, a move that boosted the base salary for a first-year lawyer in Texas offices to $104,000 from $86,000. The BigTex market eventually stabilized at a $105,000 base, and a $115,000 starting package, in Texas for first-year associates in 2000. The starting package has increased incrementally since then, with most BigTex firms currently paying a starting base of $110,000. At V&E, the total starting package is $122,000, and Andrews Kurth first-year associates are paid a $110,000 base, a sign-on bonus of $7,500, a graduation bonus of $3,000 and a guaranteed year-end bonus of $1,000. But it’s a different economy and a different market today and Thompson & Knight’s move may not lead to wholesale salary hikes in base salaries. Typically, firms look at associate salary scales in the fall. Howard Ayers, managing partner of Houston-based Andrews Kurth in 2000 and now, says he wasn’t aware that Thompson & Knight had adjusted its salary scale for 2005, but says his firm’s partners won’t look at associate compensation until this fall. Ayers says the firm’s overall compensation is competitive. “We monitor our position in the market at all times, and our commitment is to be fully competitive in total compensation,” he says, noting that the firm already uses a discretionary system for bonuses. Joseph Dilg, managing partner of V&E, says the firm is not contemplating any compensation changes. At Baker Botts, Gregory Nelson, partner in charge of the Houston office, says the firm is not considering salary hikes for associates. This year, he notes, the firm changed its bonus structure to pay an additional bonus of $5,000 to $25,000 to most associates who put in more than 2,300 chargeable hours. Those hours include billable and pro bono hours and other hours that benefit the firm. “We don’t contemplate any other changes,” Nelson says.

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