Bonus time: Year-end cash payouts on tap for many

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If you have received a year-end bonus in recent years, chances are that you will get another one this year — a possible sign that there is some semblance of economic recovery in the legal profession.

“From my experience, anybody in the past who had a bonus program will pay a bonus,” said Peter Giuliani, of Lake Forest, Ill.-based Smock Law Firm Consultants. “There was a while in the depths of the recession, they ratcheted way back, but things have recovered a bit now.”

New York-based Cravath, Swaine & Moore LLP is the bellwether for big law bonuses, setting the pace for others to follow. Last year, the firm gave $10,000 bonuses for first-year associates and ranged up to $60,000 for the most-senior associates.

That was quite a bit higher than the year before, when bonuses ranged from $7,500 to $37,500. The firm has not yet announced this year’s bonus.

“Things have been going fairly well the last couple years; during ’09, ’10 and ’11, things were flat, but things have certainly picked up,” said Ralph McDowell a member at Detroit-based Bodman PLC and chairman of the executive committee.

“Our approach really has not changed over the last several years,” McDowell said, “especially with associates; we strive to reward performance that supports our core values.”

“So earning a bonus is less impacted by the economy and more by performance,” he added. “People have a decent idea based from year to year [what the bonus will be], and the goal is to focus on core categories, and seniority plays a role in that, too.”

But the time and energy that law firms put into training associates is hard to recoup if they fly the coop in just a couple years, so bonuses may be the great equalizer.

Jon Chudler, division director of Robert Half Legal in Southfield, Mich., said he hasn’t heard a lot of rumors from those he knows in the profession — and that’s a good thing.

“If I haven’t heard anything about it, that’s probably good news,” he said. “I would have heard if people weren’t expecting bonuses, I would have heard the negative, or if they were smaller than what has been expected — bad news travels fast.”

Retention efforts, salary

“One trend we’ve seen that’s meaningful is that retention is a big deal,” Chudler said. “Maybe as a precursor to more hiring, firms are not letting good people go away easily, and bonuses will be part of that story … they don’t want to lose those people to other opportunities.”

Giuliani said times have changed and firms have to reign in the old notion of bringing in a lot of summer associates, then hiring most, if not all of them.

“There are some people who honest to God believe if they wait long enough, what happened from 2003-08 will happen from 2013 to 2018,” he said, “but this recession has changed lots of things in the ways legal work gets parceled out. I don’t think it will go back to the way it was before; firms will get in trouble of they keep up old hiring practices.”

That more selective process will be reflected in bonuses, Giuliani said, which are no longer automatically tied to exceeding minimum hours per year, but will also depend on business development, amount of actual work done and for results as well, he said.

Robert Half recently published its Legal 2014 Salary Guide, culled from the placements handled nationwide by the firm’s recruiting and staffing teams.

The research found that average starting salaries for lawyers at law firms are expected to increase 3.1 percent in 2014. Lawyers with four to nine years’ experience at a midsize law firm (35-75 lawyers) will see the greatest gains.

Starting salaries for this position are expected to increase 4.8 percent, to the average range of $124,750 to $187,500 annually. Lawyers with 10-plus years’ experience at small-to-midsize law firms (10-35 lawyers) will see starting salaries rise 4.5 percent, to the range of $124,750 to $179,000 per year. First-year associates at small-to-midsize law firms will earn between $61,000 and $86,250, a 3 percent increase from 2013 projections.

“I think it’s good news; things are improving,” Chudler said. “A lot of this is viewed from where you come from; compared to ’09 and ’10, people will look at this and not complain. I think it looks positive. I think it’s a demanding time. I think people have to find a way to distinguish and separate themselves and find practice areas that are growing and in increasing demand.”

Corporate attorneys will see average compensation gains of 3.1 percent over 2013 levels. Starting salaries for in-house counsel with 10-plus years’ experience at large companies (more than $250 million in revenue) will rise 3.7 percent, to the range of $171,750 to $245,750 annually.

Washington, D.C.-based National Association for Law Placement has a salary and bonus survey, generally saying the market is flat.

Bonuses in the Midwest region for first-year associates range from an average of $2,833 at firms of 50 lawyers or less to $13,958 at 501-700 firms, according to the survey. That jumps to $4,854 and $16,754, respectively, for third-year associates.

And if you’ve made it to eighth-year associate at a Midwest law firm of 50 or less, your average is $15,221 and at a 501-700 firm, the bonus is $19,060.

The high on the survey for first-year associates was a whopping $42,500 and a low of $79 for first-year associates, to a high of $120,812 and a low of $1,250 for eighth-year associates.

NALP’s 2013 Associate Salary Survey reports that the overall median first-year salary at firms of all sizes was $125,000, unchanged from 2012. Medians ranged from $78,000 in firms of two-25 lawyers to $125,000 in firms of 501-700 lawyers, and $160,000 in firms of 251-500 lawyers and in firms of more than 700 lawyers.

The median at firms of 251-500 lawyers was $145,000 in 2012, and had been at $125,000 from 2009 to 2011, while that at firms of 501-700 lawyers remained at $125,000 after edging up from $120,000 in 2011.

“Compared to the period of 2006 through 2009, when associate salaries were rising year-on-year at a steady clip,” James Leipold, NALP’s executive director, said in a statement, “in the period since the recession we have seen associate salaries remain more or less static.

“At the largest firms in the largest markets, a starting salary of $160,000 remains the norm, though its prevalence has ebbed and flowed a bit over the last several years. Associate salaries at smaller firms have shown very modest movement, both upward and downward, over the last four years, also remaining essentially flat.”