Cravath Swaine & Moore will give out annual associate bonuses of up to $115,000, raising the bar for extra pay and adding to base salary bumps and special, seasonal bonuses that lawyers have already received this year.
Lawyers from the class of 2021 can expect up to $15,000 and senior associates could receive $115,000, the firm announced Monday, according to Above The Law. That’s up from last year, in which bonuses topped out at $100,000 for senior associates.
Firms announced spring and fall bonuses of up to $40,000 earlier this year. Davis Polk shortly afterwards bumped base salaries for first-year associates to $205,000, with several big firms following that move.
Cravath’s announcement is expected to start a wave of similar payouts from other firms.
“I anticipate most Big Law firms will match to not only reward their associates but also to retain talent in a competitive lateral market,” Summer Eberhard, a legal recruiter for Major Lindsey & Africa, told Bloomberg Law.
“The annual bonus used to be pretty good at retention, but now breaking it up into seasonal bonuses just makes it all the more difficult for an associate to leave,” said Josh Holt, founder of associate compensation tracker Biglaw Investor.
Paul Weiss in late October also announced additional performance-based bonuses for certain associates on top of annual bonuses. Legal recruiters say these extra payments could be a way to show appreciation for associates that stay with the firm despite the lure of signing bonuses of up to $100,000 for lateral hires.
Major law firms are on track to have their best years yet. In 2020, the top 100 firms in the country brought in nearly $111 billion in gross revenue, according to data compiled by The American Lawyer. The success has continued into 2021, as the top 50 firms saw a 16.5% increase in revenue during the first half of the year, according to a Wells Fargo Private Bank survey this fall.
The 15% bump in bonuses at the highest end is reasonable, given that law firm revenue and associate salaries are also on the rise, according to recruiter Stephanie Ruiter.
“15% in a year when we’re facing potentially rising inflation, etc. makes a lot of sense without being a retention strategy,” said Ruiter a director at Lateral Link. “It’s realizing that this is what all the firms are going to do. I still think that firms will use potentially side bonuses for associates that have reached really high thresholds of billable hours.”
This year’s payouts could have the additional benefit of enticing young lawyers to work in-person when law firms officially reopen in the new year.
Most annual bonuses can only be received if associates stay with the firm through January, when the bonuses are paid out and when many firms intend to ask lawyers to return to the office.
“Firms are evaluating, ‘How do we keep associates? How do we get them to come back into the office?’ Bonuses could be a factor to that,” Holt said. “There are still a significant number, whether it’s a majority or just a strong minority, that are not excited about going to the office.”
Law firms are unlikely to back down from the race to reward associates in the coming years, Major Lindsey & Africa partner Stephanie Biderman said.
“It would be very hard to justify the numbers going down if the firms were continuing to be as profitable and as successful as they are,” Biderman said. “But if the market goes down, theoretically anything’s on the table.