Negotiating Offers

Negotiating Offers

Every year a number of students and alumni ask about negotiating starting salaries for new jobs or lateral moves. Government employers, judges and large firms are typically inflexible about negotiating starting salaries. Salaries are basically the same for everyone beginning at the same level.  Lateral attorneys, however, have a bit more flexibility with large firms.

Small- to medium-sized firms, especially those which hire every few years, seem to have more flexibility when it comes to negotiating compensation. Besides salary, there are other aspects of compensation you might want to consider discussing. Obviously, when you are negotiating with your employer, you should remember that you are entering a working relationship. You do not want to win some small benefit if it will affect your working relationship in the long run.

Consider the following issues:

Timing and Technique - Try to avoid any discussion of salary until you have an offer or at least until the firm has expressed a strong interest in you. Once you have the offer, make sure the employer knows how excited you are about the offer before you begin negotiating.

Like all good negotiations, do your research first. Try to determine what the employer might think is an appropriate range. Think about what your bottom line is. Besides starting salary, what other factors are important to you?

Try to do the negotiation face to face. Don't think of the negotiation as a win/lose proposition. Rather, think of it as an attempt to maximize your mutual wants and needs.

Salaries - It may be helpful to talk to someone in the Career Services Office to get a sense of what salaries for similar positions might be. Geographic location, firm size and practice areas all influence salary. There are some written resources that can assist you with your research. NALP publishes an annual Associate Salary Survey. The Career Services Office has this publication, as well as some others that discuss salary. The NALP website, www.nalp.org, the Findlaw website, www.findlaw.com, and www.infirmation.com, and www.salary.com all provide information, as well as links to discussion boards. You also might call the local bar association or the Career Services Office of a local law school to see if they can provide a range of starting salaries. (We can also call the local law school's CSO.) Numbers from comparable firms can help you educate an employer about the market and the recent increase in salaries.

If you have an offer from another employer, use it if it helps you. ("I really like your firm and feel that this would be the best fit. Nonetheless, I do have an offer from ___, and they are offering ___. With my debt load, I have to at least consider the money aspects.")

You might ask the employer what your billing rate will be. Multiply your billing rate by the number of hours the firm expects you to bill. For example, if the firm will bill you at $100 per hour and expects you to bill 1800 per year, you might generate up to $180,000 per year for the firm. (Remember that the firm will not necessarily collect on all billables and that your firm may not bill out all your time. For example, assume the firm only bills 1700 of your 1800 hours and then only collects for 1600 of the 1700 hours. Your realization rate would be 89% (1600/1800) and the firm would only be collecting $160000. If on the other hand, you are very efficient and are doing particularly difficult work where the firm can engage in premium billing, your realization rate might be 100% or more.)  Some firms might think about setting your salary at around 1/3 of your total billables. (The idea is that about 1/3 goes to you, 1/3 goes to benefits and overhead, and 1/3 goes to the partnership.)

When you are negotiating about salary, you might also mention the amount of student loans you have. (You might say something like, " I'm a little worried about making ends meet with a salary of ___. My debt load is ___; I have calculated my monthly loan payments to be ___. So _____ of my annual pretax income will be going to loan payments.") Many employers are shocked to find out that many students have six figure debt loads.

Some firms will not budge off a low number, so you might ask them to agree to review your compensation after six months of employment. You might also ask about what to expect in terms of salary one or two years out.

Shared Fees - Find out whether the firm will give you a cut of the fees generated by any client you bring in. Oftentimes, the firm will treat the amount of the shared fee differently depending on whether you or someone else in the firm did the work. For example, a firm might offer a 50% shared fee for clients you brought in if you do the work, but only 25% if someone else in the firm does the work.

Bonuses - Some firms may offer a lower starting salary but offer a bonus if you bill more than a certain number of hours per year. Other firms may provide a bonus if they have had a good year. Many firms offer no bonus at all. If the firm does offer a bonus, find out if it is discretionary or automatic based on certain factors. At some firms, bonuses are a significant portion of your compensation. If a firm will only provide a small starting salary, you might suggest a bonus linked to the number of hours you bill over a certain amount.

Deferred Compensation and Benefits

A. Deferred Compensation
I. Pension Plan - Some law firms have a straight pension plan. You will want to find out when the pension vests and the relative amounts of the employer's and employee's contributions to the plan.
II. 401 (k) Plan - Many employers have a 401(k) plan where you make pre-tax contributions. Some employers will match your contribution to the plan.
III. IRA - Many employers provide no pension plan at all. They simply suggest that you make contributions to your own IRA.

B. Medical Benefits - You should probably find out what is covered - medical, dental - and the amount of the deductible and co-payments. If you have dependents, find out if they are covered and at what cost.

C. Life Insurance and Disability - Some employers will provide you with life insurance and disability insurance.

Parking Fees - The relevant issues are whether your employer will pay for your parking and where you can park. There are often safety issues if the employer requires you to park a couple of blocks away.

Starting/Signing Bonuses

A. Bar Review Courses - As you know, the bar review courses are expensive. Some employers will pay for that.
B. Bar Exams Fees - Some firms will pay these fees so keep records on any registration fees you pay.
C. Moving Expenses - Some firms will pay for moving to another city.
D. Signing Bonus - Some firms offer a bonus when you accept their offer.

Annual Bar Dues - There are a number of bar associations that charge dues for membership. These include the American Bar Association, particular state bars of which you are a member, and local bar associations, such as the Metropolitan Bar Association of St. Louis. These fees add up.

CLE Seminars - Many states require bar members to satisfy a Continuing Legal Education (CLE) requirement. Most CLE seminars that are offered have fees associated with them.

Club Dues - Some (but very few) law firms will cover dues at private lunch clubs.

Vacations - Determine how many weeks of vacation and sick leave you can accrue per year and when you can use them.

Maternity-Paternity/Family Leave - Different firms have different policies. Sometimes a firm might have a six week paid maternity leave and then a six week unpaid leave. Firms may vary greatly in how much they offer in this area.

Malpractice Insurance - You will ultimately want to confirm that the firm is paying your malpractice insurance. Nonetheless, I am not sure I would raise this at an initial negotiation session.

Starting Date - Some firms are very flexible, while other firms are much more rigid about when you must start. Firms also vary as to whether they will allow you to work full or part time or not at all before the bar exam.