But the news coincided with one of the biggest law firm layoffs the US has seen since the beginning of the credit crisis, with White & Case slashing associate jobs in the US and the UK (see story).
Coincidence? We don’t think so. Firms are under serious pressure to keep costs down. Limiting bonuses is a good way to do this, and nothing limits a bonus like a layoff.
The aggressive bonus war has not got into full swing just yet but US partners are already making predictions.
“The real moment will come when one of the New York big 10 says what it is they’re doing,” says one US partner. “The context this year of course is what’s been happening to clients and on Wall Street and then by extension, how the law firms that service these clients are going to respond.”
Word on the street is that some firms have amended their bonus structures, using the year’s dwindling work flows as a tool to reduce bonus payouts.
“Hours are usually used as the basis for associate bonuses, with merit being a crucial reason for an associate receiving a particular bonus,” says one US recruitment consultant.
“This year I think many firms will use hours only. Considering that most associates have not been busy, this means a lot of lawyers will not qualify for a bonus.”
Less cash for fewer hours seems fair enough. But moving the goal posts at the last minute seems unfair, to say the least.
“Firms will say it’s a good thing because their stars will have an opportunity to shine,” says a US recruiter. “But in reality it’s just way to spend less cash when times are tough. There will be a lot of unhappy associates in New York.”
Star associate or not, work is hard to come by and hitting new, aggressive hourly targets could be difficult for even the most industrious associate.
The over-riding impression in the US legal community is that this year, bonuses will stand in stark contrast to last. And it’s the credit crisis that is to blame.
“I can’t even imagine that the majority of firms will have bonuses at all,” says Martha Klein of US recruitment consultant MLegal Consulting. “This will really separate the men from the boys in this economy. Which firms do bonuses and which don’t will reveal a lot about their finances.”