Many of the world’s top law firms have capped a tumultuous year with big bonuses for junior lawyers and an end to austerity measures imposed during the height of the global pandemic.
US law firms have in recent weeks announced bonuses of up to $100,000 for junior staff, matching levels set last year. Those sums come on top of a spate of “special bonuses” that top-tier American firms announced in the autumn to recognise associates’ work during the Covid-19 crisis, taking total bonus packages up to $140,000 for some.
Bonus season arrives at the end of the calendar year for most US firms, many of which have performed better than expected during the pandemic allowing them to bring to an end an initial period of relative austerity.
“Financially, 2020 has turned out to be a splendid year for revenue and profits after a heart-stopping spring,” said Bruce MacEwen, president of law firm consultancy Adam Smith Esquire.
He added there was “a whiff of ‘We dare you to match this’ in the air”, putting pressure on less flush firms to match a new market rate for large year-end bonuses.
Cravath, Swaine & Moore, whose bonus scale sets the benchmark for Wall Street’s legal elite, said in November it was making year-end payouts ranging from $15,000 for first-year lawyers up to $100,000 for those who joined the firm in 2013.
In November and December, UK “magic circle” firms including Allen & Overy, Linklaters and Clifford Chance said they would pay bonuses at the same level to their US-based lawyers. All four magic circle firms reported muted revenue rises this year but have been drawn into an increasingly fraught bidding war for junior legal talent in the US.
Earlier this year, competition intensified when California-based firm Cooley said it would hand out “appreciation bonuses” of between $2,500 to $7,500 depending on experience for all non-partner staff. The bar was quickly raised by Davis Polk, which set a maximum special bonus of $40,000.
Freddie Lawson, director at legal recruiter Fox Rodney, said: “These US law firms have had stronger years than they expected and have recognised that staff have had a particularly tough time. Law firms rely on cultures of cohesiveness and these bonuses are a good way to rewarding the loyalty.”
Most London associates, who will learn in the spring what their bonuses for 2020 will be, have not benefited from the special Covid-19 payouts in line with their US peers.
Instead, large international law firms in the City have focused on rolling back austerity measures imposed at the start of the pandemic, including temporary pay cuts or pay freezes and deferred partner payments.
London-headquartered Osborne Clarke paid back government support for staff placed on furlough and repaid 7 per cent salary reductions instigated earlier in the year after meeting its revenue targets, while Hogan Lovells reversed pay cuts in the US two months ago and reinstated pay reviews in the UK, backdating pay rises to May.
In November Pittsburgh-based Reed Smith reinstated partners’ monthly payouts and restored full pay to partners, counsel and associates whose salaries had been temporarily cut.