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Big Law’s 2023 Bonus Season Anticipated to Maintain Consistency Amidst Market Shifts
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Top Firms Prepare to Offer Predictable Bonus Scale Amidst Lateral Hiring Slump

Big Law’s annual bonus season is on the horizon, and insiders expect it to be a relatively subdued affair with familiar bonus structures in place, particularly for associates. Amidst the industry’s ongoing evolution, law firms are projected to continue matching the bonus scale established over the past two years, reaching up to $115,000 for senior associates. This anticipated continuity follows a unique confluence of factors, including a slowdown in corporate work and the cessation of recruitment wars that had previously pushed bonus scales higher in 2021.

Anticipated Bonus Scale Maintenance

  
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According to legal industry observers, even firms that resorted to associate layoffs last year or experienced a decline in profits are likely to adhere to the established bonus scale. The motivation behind this is the desire to showcase a full recovery and maintain their reputation within the competitive legal landscape. Kate Reder Sheikh, a legal recruiter for Major, Lindsey & Africa in California, asserts that firms previously in the spotlight due to layoffs will be particularly keen to match market bonuses, emphasizing their resurgence.

Eligibility Criteria Tightening

While the bonus scale is expected to remain consistent, firms may make it harder for some associates to qualify for these extra payments. There is a growing likelihood that billable hour requirements will increase, with some firms already indicating their intention to consider office attendance when determining bonus eligibility.

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Former Goodwin Procter lawyer and founder of BigLaw Investor, Joshua Holt, highlights the role of billed hours in the bonus allocation process. He explains that firms can claim to pay market rates, even if only a limited number of associates meet the bonus criteria during a challenging year. This approach allows firms to maintain a competitive image without a substantial financial burden.

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Special Bonuses as an Anomaly

Announcements regarding year-end bonuses typically commence in late November, setting off a wave of matching bonus announcements by competitors eager to ensure they offer competitive compensation. While some firms, such as Baker McKenzie, have adhered to the previous year’s bonus scale, Quinn Emanuel took an unusual step by introducing “special” associate bonuses, in addition to regular annual bonuses. These special bonuses can amount to nearly $33,000, varying based on seniority and billed hours. However, it is unlikely that other firms will follow this trend, as per Reder Sheikh’s assessment.

A slowdown in lateral associate hiring has also contributed to dampened expectations regarding extra bonuses. Data from Decipher indicates a nearly one-third decline in lateral associate hiring through September compared to the previous year.

Strains on Bonus Expectations

Major law firms have long grappled with the challenge of keeping pace with industry leaders concerning associate salaries and bonuses. The gap between the most profitable firms and their peers continues to widen, sparking discussions about whether other firms might eventually stop trying to match the compensation offered by Cravath Swaine & Moore, an originator of the modern associate pay scale.

Reder Sheikh suggests that some differentiation may occur, especially for firms significantly affected by slowdowns in tech, private equity, and M&A work. Decisions on bonus structures may become a matter of financial prudence for these firms.

On the other hand, Holt is less convinced that top firms will diverge from the traditional practice of uniformly offering bonuses. He suggests that bonuses allow firms to appear competitive in terms of compensation, even if associates cannot meet the criteria due to lower billable hours.

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Office Attendance and Bonus Pay

Notably, several Big Law firms, such as Davis Polk & Wardwell, Sidley Austin, and Simpson Thacher & Bartlett, have announced their intent to potentially reduce bonus pay for associates who do not meet specific office attendance requirements. Davis Polk, for instance, mandates lawyers to be in the office four days a week, while Simpson Thacher and Sidley require three days of in-office presence per week.

This move has prompted concerns, as associates who surpass billing targets but have their bonuses cut due to insufficient office attendance may question the fairness of such policies, as pointed out by Katherine Loanzon, managing director at legal headhunting firm Kinney Recruiting. The balance between billable hours and physical office presence remains a topic of debate in the industry.

As Big Law’s annual bonus season approaches, associates and firms alike are bracing for a period of continuity mixed with evolving eligibility criteria, further shaping the dynamics of bonus distributions in the legal sector.

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