New Jersey’s large firms are hiring larger classes of new associates and boosting first-year salaries by more than 10 percent, a New Jersey Law Journal survey finds.

Salaries this fall at a sampling of 21 firms will range from $95,000 to $130,000, and hires are up 19 percent, to 157 from 131 last year. The largest New Jersey-based firms will pay $120,000 to $125,000. [See chart.]

Firms interviewed say their hands were forced by a wave of increases by New York firms that began Jan. 22 when Simpson Thacher & Bartlett pushed its starting salary to $160,000. Since then, other firms in New York and Philadelphia have elbowed up to $145,000 or higher.

Flaster Greenberg managing partner Peter Spirgel says competitive pressures in the Philadelphia market led his firm to escalate to $130,000 this fall. “I’m hoping it will enhance our recruitment of top graduates from the nation’s best law schools,” he says. “But this has to stop somewhere. We can’t continue to pass salary increases to clients indefinitely.”

Steven Klein, hiring partner at Cole, Schotz, Meisel, Forman & Leonard, says his firm, which has an 18-lawyer New York office, also felt the competition. “The Simpson Thacher hike and its progeny has had an effect on our thinking,” says Klein, whose firm increased pay by 15.4 percent to $112,500, which includes a $2,500 starting bonus. “We can’t keep up with the Joneses to the full extent. But we are looking for the best people from the same talent pool,” he says.

Even with higher salaries, firms are bulking up with first-years. The total freshmen at the 21 firms surveyed increased by 19 percent over a similar survey last year. Lowenstein Sandler is taking on 26 new lawyers, 12 more than last year, and McElroy, Deutsch, Mulvaney & Carpenter hired 19, compared with 13 last year.

NO SHORTAGE OF CANDIDATES

For all the difference between New York and New Jersey salaries, Gibbons hiring partner Peter Torcicollo says he has not seen a drop in the number of qualified applicants. His firm raised its salary by 28.9 percent, the largest percentage among all large firms in New Jersey, even national firms with offices there. This fall, base pay at Gibbons will be $125,000, up from $97,000 in 2006, partly because of the wave of salary hikes after Simpson Thacher’s.

Lowenstein, which is increasing pay by 8.7 percent to $125,000, had a higher-than-expected acceptance rate, coupled with a higher hiring rate to accommodate an across-the-board increase in workload. “We wanted to hire more first-years because of a general sense of how busy we expect to be,” says managing partner Michael Rodburg. “We were actually looking for a first-year class of 22, and we got more acceptances than we expected.”

On the other hand, Lowenstein lost senior associates in its New York office to firms like Shearman & Sterling. “We lose folks — four or five associates a year, sometimes — to firms where the pay differential is $50,000 or $60,000 more,” says Rodburg. “It’s a herd mentality. Most associates are not looking at long-term careers any more; even if they succeed at one firm, they’re looking to go somewhere else.”

Rodburg tells laterals at New York firms that New Jersey firms have their employers beat on “lifestyle and opportunity bases.”

Sills Cummis Epstein & Gross hiring partner R. Max Crane beats the same drum. “We try to offer a different life,” he says, adding that New Jersey’s big firms offer things new lawyers don’t typically get at New York firms. “It’s hard work, but you get responsibility,” he says. “You become a complete lawyer. You get more of a chance to make partner, to stay for the long term instead of having to move up and out. … New York is blood hours; we offer a trade-off.”

Sills Cummis raised its first-year pay by 11 percent to $125,000, plus a $2,000 “tech bonus” for purchasing BlackBerrys, laptops or the like. The firm also covers closing costs for home buyers.

Every New Jersey big firm puts its own twist on enticing and retaining talent, but most try to keep starting salaries at realistic levels and reward lawyers with merit bonuses for quantity and quality of work and for originating business.

McCarter & English, for example, bumped base pay for first-year associates by 12.5 percent to $125,000 and has promised additional merit bonuses, says Christine Lydon, the lawyer in charge of the firm’s professional staff.

Rodburg says his firm offers four bases for compensation: a base salary decided each year, a quantitative bonus based on billable hours, a qualitative bonus based on client services and commitment to the firm and fee-sharing for client origination. “Our base salary raises are made on an individual basis rather than across the board,” he says.

Not surprisingly, the highest salary, $145,000, is being paid at New Jersey offices of out-of-state firms: Drinker Biddle; Latham & Watkins; and Proskauer Rose.

New Jersey’s managing and hiring partners say even if they wanted to match that, the cost would be financed by cutting partner profits, hiking client rates or shrinking discretionary bonus pools for more senior associates.

One firm, Day Pitney, has responded to the increased competition for new recruits by implementing a two-tier starting salary structure: $130,000 in New York and Boston and $120,000 in Florham Park, N.J., and Stamford and Hartford, Conn.

“We need to look at the issue further,” says Dennis LaFiura, co-managing partner in Florham Park. “The hikes in starting salaries have as much an impact on lateral hiring as it does on first-year hiring.”

Lowenstein’s Rodburg says he is giving the two-tier structure a hard look as the firm recruits for its 30-lawyer New York office, which handles hedge fund and other specialty financial matters.

Connell Foley says New York salaries did not factor into its decision to raise its pay to $110,000 with a $5,000 bonus, up from $98,000 last year. “We only view New Jersey firms as our competition,” says hiring partner Steven Falanga.

Other firms are still on the fence. Paul Rowe, managing partner at Greenbaum, Rowe, Smith & Davis, which hiked starting pay to $110,000, up from $97,500 last year, says his firm is poised to make further increases if the market dictates.

“We will adjust those salaries if, at the time, that is necessary to be competitive,” says Rowe, adding that his firm awards a bonus of $4,000 to $10,000 for productivity and a percentage of collections for business origination.