Reed Smith announces 20% pay cut for newly-qualified US associates

Reed Smith has unveiled a new pay scale that sees first-year associate salaries cut by 20%, reports The Legal Intelligencer.

The moves comes two weeks after the firm announced it was revamping its associate model by doing away with year-based classes and moving to a competency-based compensation system.

Global managing partner Greg Jordan (pictured) said the salary cuts, which will only affect first-years in the firm's 15 US offices, are market-dependent and reflect a demand by clients to drive down the cost of legal services. Billing rates for newly-qualified lawyers will also be cut 20%.

Starting salaries and billing rates for first-year associates in Reed Smith's offices in Europe, the Middle East, and Asia will be determined next year.

Under the new structure, annual salaries for first-year associates in Reed Smith's California, Chicago, New York, and Washington DC offices will fall from $160,000 (£96,000) to $130,000 (£78,000).

Salaries for Philadelphia first-years will decrease from $145,000 (£87,000) to $117,500 (£70,500), while in Pittsburgh, newly-qualified pay is set to fall from $135,000 (£81,000) to $110,000 (£66,000).

As part of the salary cuts, first-year associates will see a reduction in their billable hour targets from 1,900 hours to 1,700. Jordan said that the billable time reductions were instituted to allow associates to take advantage of the training programs that are part of the firm's new associate advancement model.

Reed Smith has had two rounds of layoffs in the past year. In April the firm cut 26 associate and 55 staff jobs. In December 2008, Jordan said that a reduced demand for legal services from clients resulted in 115 staff members being let go from the firm's US offices and 11 associates and seven members of staff from its London office.

The Legal Intelligencer is a US sister title of Legal Week.