Big Law Summer Bonus Update
The Big Law summer bonus season that was kicked off by Milbank, as we recently reported, and has left some firms following suit and others . . well, left deciding what to do. And associates too are wondering what may happen to their summer bonus.
It’s a mixed bag regarding bonus payments. While some boutique firms have taken the lead in announcing summer bonuses, many larger firms are adopting a more cautious approach following the Milbank move.
Hueston Hennigan, a prominent California boutique firm, made waves by announcing summer bonuses ranging from $10,000 to $25,000 for associates and counsel meeting specific billing thresholds.
This was followed by Texas-based McKool Smith, (the ‘powerhouse litigation firm’) which revealed a similar bonus structure ranging from $2,500 to $30,000.
And New York-based litigation boutique Desmarais Law Group who had already announced “appreciation” bonuses in February, to be paid at the end of June, along with salary increases for junior associates.
However, the trend has not yet caught on broadly among larger law firms. Bill O’Neil, Chicago office managing partner for Winston & Strawn, expressed skepticism about the widespread adoption of summer bonuses, stating that firms are busy but not desperate enough for talent to offer such incentives. He predicted that these bonuses would not become common in the market.
The legal industry is currently experiencing a highly competitive market for talent, leading some firms to explore various compensation strategies.
While summer bonuses have been one approach, other firms have focused on base salary increases. For instance, Milbank raised first-year associate salaries from $205,000 to $215,000, with proportional increases for more senior associates.
Davis Polk subsequently matched this new salary scale by offering summer bonuses ranging from $4,000 to $23,000, depending on the associate’s class year.
And then, of course (given that they ‘named’ the big law salary scale) along came Cravath Swaine & Moore with their bonuses.
Some firms have also introduced retention bonuses to address attrition concerns. Goodwin Procter, for example, announced a one-time special bonus ranging from $20,000 to $50,000 for associates who remain with the firm until a specified date.
Big law firms seems to be a cautious approach to compensation adjustments – trying to balance the need to remain competitive with the wider-ranging implications of broad-based bonus programs.
From all accounts it appears that firms are in a period of observation, with many firms monitoring market developments before making significant moves on the bonus front.
It’s worth noting that the focus on compensation in big law firms has led to some comparisons with other high-paying professions. The enormous pay packages for top lawyers, especially those favored by private equity clients, have drawn parallels to the NBA’s star-centric system, as the New York Times observed.
Inevitably there have been concerns raised about the sustainability of ever-increasing compensation levels and their potential strain on law firm budgets.
As the legal profession continues to evolve, it remains to be seen whether summer bonuses will become a widespread practice or remain limited to select firms.
Associates will be waiting with baited breath, no doubt. But the feeling presently is that there is a mixture of anticipation on their part, but caution on the part of the big law partners who need to balance expectations with balance sheet realities.
