Big Law bonus season is approaching and companies are gearing up to pay out more money to some associates than they did last year, even after giving them two seasonal rewards and a raise of base salary earlier in 2021.
Annual bonuses will likely match last year’s $ 15,000 to $ 100,000 range, although some attorneys will see special bonuses on top of that, as partners seek to reward increasingly overworked associates who carried the burden of firms in another year of record profits.
“One thing companies have started to realize is that there is no bottom,” said Stephanie Ruiter, director of legal recruiting firm Lateral Link. “There will always be a business willing to pay more. “
Companies see seasonal and special bonuses as a way to retain associates in a booming talent market. In 2020, for example, large law firms gave associates fall bonuses in addition to annual bonuses as an appreciation for their work during the pandemic. Some companies are looking to repeat this approach with 2021 end-of-year rewards.
“I’ve heard from many different companies expecting premiums to be higher than in the past,” said Summer Eberhard, Managing Director of Major Lindsey & Africa.
In March 2021, Willkie Farr & Gallagher and Davis Polk announced additional spring bonuses of up to $ 40,000 for senior associates, forcing other members of the industry to match. Davis Polk subsequently announced a base salary increase for his associates, increasing first-year salaries to $ 205,000, while senior associates earned up to $ 365,000.
Last week, Paul Weiss announced special bonuses for certain associates based on their performance in the second half of this year. It is likely that many large law firms will follow in Paul Weiss’ footsteps and offer additional special bonuses, Ruiter said.
Such bonuses are a way to show associates appreciation for the company at a time when side recruits are receiving signing bonuses of up to $ 100,000, she said.
“It’s not fair to give, say, $ 80,000 across the board,” Ruiter said. “I see the most likely scenario, ‘Hey, you billed 2,800 hours this year, we’re going to give you the normal bonus, but also a special bonus. “
Back to office
The extra bonuses have a particular appeal for law firms this year: the return of lawyers to the office.
More than 20 large companies have announced dates to reopen offices in early 2022 after the delta variant of Covid 19 wreaked havoc on plans to return to work in person later this year. The start of 2022 is also the time when companies pay annual bonuses.
The promise of special payments on top of annual bonuses could encourage associates to stay long enough to work in person, said Josh Holt, founder of Biglaw Investor, which tracks associate compensation. It could help businesses regain their sense of community and culture, he said.
“Companies assess: ‘How to keep associates? How do you get them back to the office? Bonuses could be a factor in that, ”said Holt. “There are still a significant number, whether it’s a majority or just a strong minority, who are not keen on going to office.”
The large bonuses that associates receive are likely to continue beyond this year as companies increasingly rely on them for heavy workloads. Partners at some of the larger companies are on track to bill over 1,800 hours on average this year, up from around 1,650 last year.
“Companies will reward their associates accordingly,” Eberhard said. “The revenue that we’re going to see from businesses after this year is going to be significantly increased from what we’ve seen in the past.”
The top 100 companies in the United States generated nearly $ 111 billion in gross revenue in 2020, up from $ 104 billion in 2019, according to data from the AmLaw annual report. This continued into 2021, with 16.5% first-half revenue growth for 50 of the largest companies, according to an August Wells Fargo Private Bank survey.
Companies like Davis Polk are on their way to breaking financial records in a single year. Associates in particular will receive rewards for the number of hours they have to devote due to the lack of side talent, Eberhard said.
But in the long run, the big bonuses won’t be enough for companies to keep their associates, said Stephanie Biderman, partner at Major Lindsey & Africa.
“A lot of what I see keeping associates in their businesses is really feeling like they have positive working relationships with their colleagues, especially their partners,” Biderman said.
The associates also like “to have a lot of transparency about their position in relation to the partnership”, she said, “and to have relationships where they feel they are heard and valued”.