Are Big Law's 'special' associate bonuses here to stay?
3/25/21 REUTERS LEGAL 22:48:29
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Caroline Spiezio
REUTERS LEGAL
March 25, 2021
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(Reuters) - The last week brought a sudden burst of associate bonus news, with a growing list of firms pledging "special" payouts as high as $64,000 this year to reward hard work during the pandemic.
The off-season bonuses - coming just months after a similarly unusual bonus flurry last fall - are a side effect of a COVID-19 era legal market that kept many firms busier than expected. But could the associate pay boost outlast the pandemic?
It depends, legal industry experts said. In-demand associates won't be happy to see their year-over-year compensation fall in 2022 if their peers at rival firms keep getting paid at 2021 levels, said Michelle Fivel, a partner at legal recruiting firm Major, Lindsey & Africa.
But, she added, "If across the board, nobody winds up giving [special] bonuses next year, I don't think you'll see grumblings."
Law firms began giving associates special bonuses in the fall, as junior talent juggled high workloads with the added stress and home responsibilities of the pandemic. Davis Polk & Wardwell set the pace with bonuses of $7,500 up to $40,000, based on class year. A parade of firms followed suit.
Willkie Farr & Gallagher kicked off the latest round of special bonuses on Friday, pledging to give associates $7,500 up to $40,000 based on class year, with half the amount paid on June 30 and the other half on Sept. 30. Davis Polk upped the ante Monday, announcing two-installment bonuses that ranged from $12,000 up to $64,000.
A slew of other firms - Skadden, Arps, Slate, Meagher & Flom; Milbank; Paul, Weiss, Rifkind, Wharton & Garrison; Debevoise & Plimpton; Cleary Gottlieb Steen & Hamilton; Simpson Thacher & Bartlett and Goodwin Procter - have since matched that scale. Above the Law has reported Fenwick & West matched, too, but that firm declined to confirm the news.
The new bonuses come as firms grapple with how to keep associates content and engaged as offices stay shuttered, deal volume remains high, and finance leaders like Credit Suisse and Apollo announce similar payments to retain junior talent.
While associates at top law firms have now seen their pay lifted by surprise bonuses two years in a row, they shouldn't expect those bonuses to repeat "unless the underlying conditions repeat," said James Cotterman, an Altman Weil Inc principal who advises law firms on compensation, in an email.
"We all would prefer to not have 2020 repeat itself if it means another public health crisis," Cotterman said. "But if associates contribute to a banner profit post-pandemic, it would be natural for them to expect a banner bonus payment. It all depends on how well they and their firms perform."
The coronavirus and its impact on the economy highlighted the value of that financial flexibility.
Firms giving special bonuses now "get the benefit of those bonuses with their current people and people they're trying to recruit without setting a floor for next year that they have to live with," said Kent Zimmermann, a legal consultant at the Zeughauser Group.
Still, he said [it's] "unlikely that at high-performing firms associate comp is going to do anything but continue to go up."
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