Big Law Bonuses Holding Steady But Now Come With More Strings

Big Law’s annual bonus season is expected to be light on fireworks when firms soon start announcing extra pay for associates.

Top firms are likely to match the same bonus scale used in the past two years—from up to $115,000 for the most senior associates—according to industry observers. The recruiting wars that boosted the scale in 2021 have since halted as corporate work continues to be slow and some firms have shed jobs to cut costs.

Even those who laid off associates last year and others whose profits plummeted are likely to match the bonus scale, said Kate Reder Sheikh, a California legal recruiter for Major, Lindsey & Africa. They want to try to show that they’re back at full strength.

“Firms that were publicly in the news having done layoffs, I think they will be very sure to pay market bonuses,” she said.

But the eligibility criteria that firms attach to extra payments could make them harder to come by for some associates. Firms are likely to increase billable hour requirements and some have already said they’ll take office attendance into account.

“The great thing about bonuses for firms is that it’s all dependent on the number of hours that the associate is billed,” said Joshua Holt, a former Goodwin Procter lawyer and the founder of BigLaw Investor. “They can get away with saying ‘we’re paying market rates,’ even if they don’t have that many associates that qualify for those bonuses if the firm’s had a really tough year,” he said.

Special Bonuses ‘One-Off’

Firms typically begin announcing year-end bonuses in late November, setting off a flurry of matches as competitors assure associates that they will pay the going rate. Baker McKenzie was the first to announce bonuses last year, using the same scale from the previous year.

Quinn Emanuel got ahead of the game earlier this month, announcing “special” associate bonuses in addition to annual extra payments. The bonuses range up to nearly $33,000 based on seniority and hours billed over the year.

Other firms are not likely to follow suit at this point, said Reder Sheikh.

“Firms can move on a modest off-cycle bonus within just a couple of days,” she said. They haven’t moved yet, which means the Quinn bonuses are probably a “one-off fall bonus and other firms are not going to fall into line.”

A hiring slowdown is also putting the damper on extra bonus expectations.

Lateral associate hiring declined by nearly one-third through September, compared to the same time last year, according to data from Decipher.

Strings Attached

Major law firms have long faced risks in trying to keep pace with the industry elite when it comes to associate salaries and bonuses.

The gap between the world’s most profitable firms and everyone else continues to grow. That’s prompted questions about whether other firms will eventually stop trying to match the compensation offered by the likes of Cravath Swaine & Moore, which is credited with establishing the modern associate pay scale.

Some stratification is possible, according to Reder Sheikh, as some firms have been particularly hard hit by slowdowns in tech, private equity and M&A work.

“This is a financial decision the firm needs to make,” she said. “I don’t think that’s unthinkable.”

Holt isn’t so sure the top firms are going to ditch moving in lockstep over bonuses.

“Bonuses are the one place where it gives firms cover to look like they are paying market compensation even if they are not effectively paying market compensation because their associates aren’t earning them,” Holt said.

Many associates, especially at the junior level, are not on track to hit the billable hours required to qualify for full bonus payments, said Katherine Loanzon, managing director at legal headhunting firm Kinney Recruiting.

Several Big Law firms such as Davis Polk & Wardwell, Sidley Austin, and Simpson Thacher & Bartlett also have said they may cut bonus pay for associates who do not meet office attendance requirements. Davis Polk requires its lawyers to be in four days a week, while Simpson Thacher and Sidley require three days in office per week.

Associates who surpass billing targets but have bonuses cut because they haven’t hit the office enough are not going to be happy, Loanzon said.

“Attorneys will begin to think about whether it’s fair,” she said.