You’ve probably seen the headlines: Firms hike associate pay!
First, don’t panic. This may not signal an imminent increase in rates. During and after the Great Recession, associate pay remained flat. As the cost of living creeps up — along with student loan debt — increasing associate salaries is one way for high-end firms to attract and retain talent.
Moreover, some corporate legal departments have already put firms on notice that they won’t bear the cost of these salary bumps.
Make sure you have safeguards in place to monitor and control legal spend. The most basic protection is having your outside firms use an e-billing system. Your system of choice should store rates for every timekeeper working on your matters. Typically, these systems will either notify you of any changes to timekeeper rates or prevent changes without your department’s approval.
AFAs may provide another safeguard against timekeeper rate increases. Existing AFAs will ensure there are no near-term increases. If your firms start talking about rate hikes, consider a more advanced approach like competitive bidding or tendering. You can use competing bids or tenders as leverage to encourage a lower offer from your preferred firm or as an opportunity to work with a lower-cost provider.