A leaked internal memo, first published by Above the Law and later seen by BigLaw Business, details Cravath’s full associate pay spectrum to come into effect from 1 July. Fresh-faced lawyers from the class of 2015 will now be allocated an annual salary of $180,000, representing a raise of $20,000 on the previous base salary for first-years. The salary staircase cracks the $200,000 mark for associates with three-years’ experience or more, with seventh or eighth-year senior associates weighing in above $300,000 per year for the first time.

Winning over top talent

Cravath’s decision to up pay for first-year associates – the first from a New York firm of its stature since 2007 – may be a sign that the war for top-tier talent is once again heating up in the New York market as the graduate talent pools remain depressed. In 2015, there were 39,984 new law graduates entering the job market, down 9 per cent on the previous year. Cravath’s decision is likely to trigger a domino effect through other elite New York firms, which will need to match Cravath’s offering in order to stay competitive with graduates. However, Indiana Mauer University School of Law professor William Henderson doubts that the effect will extend out nationwide to the US’ largest 100 players. ‘They want to get the best talent,’ said Mr Henderson of Cravath to Big Law Business. ‘I don’t see everybody going to 180 – that’s just a little bit too rich.’

Retaining midlevel associates

Above the Law managing editor David Lat, who broke the news of the pay increase, believes that the new pay spectrum at Cravath has as much to do with retaining midlevel and senior associate talent as it does with attracting top-tier juniors. ‘There aren’t that many jobs out of law school that will pay someone, even a top grad of a top school, more than $160,000. But midlevel and senior associates have other options – and in recent years they have been exercising them, leaving larger firms for smaller firms, government and in-house opportunities,’ he told Big Law Business.