Survey shows hours billed determines bonus levels
25 January 2010 | By Gavriel Hollander
Bonus payments for partners below equity level are based more on recorded and billed hours than on business development and competency-based performance, according to legal recruiters First Counsel.
Source: Peter Searle
A survey into non-equity fee-earners’ remuneration at law firms has also found that there are significant discrepancies in both salary and bonus payments between fixed-share and salaried partners.
The survey, carried out by legal recruiter First Counsel, further reveals that salaries for support service staff dropped as the recession took hold. Firms have increasingly turned to innovative benefit packages for employees in a bid to offset declining pay packets.
The survey reveals a marked discrepancy between bonus distribution at firms that offer both salaried and fixed-share partner positions. It also shows that non-equity partners’ bonuses were often far below the maximum available.
Sharon White, chief executive at Stephenson Harwood, says: “There can be a difference between expectations and reality, but it’s shortsighted not to reward the contribution that people make to a firm properly because they won’t put up with it.”
Stephensons operates a fixed-share model, with all partner bonuses coming from a central pool. White adds that the firm has increased the number of bonuses it pays to non-equity partners in recent years.
While 90 per cent of firms that operate a salaried partner model claims that bonus payments are dependent on individual performance, that figure drops to 77 per cent when applied to fixed-share partners. Salaried partners’ bonuses also depend more on firm performance than their fixed-share peers’.
Furthermore, recorded and billed hours are seen as a more important factor for salaried partner bonuses. Conver
ely, ‘exceptional’ performance is rated as a more important part of bonus calculations for fixed-share partners.
The survey’s authors suggest that the reason for this is that fixed-share partners’ remuneration already takes into account the performance of the firm as a whole. Bonus payments, therefore, “will be less structured and more focused on the firm as a whole,” First Counsel’s survey says.
While salaried partners are paid a salary and discretionary bonus, fixed-shared partners are paid bonuses based on the profit of the firm as a whole.
Of the 74 firms that responded to the First Counsel survey, just over half have salaried partners, while two-thirds operate a fixed-share partners model either instead of, or in addition to, their salaried partners.
Simmons & Simmons managing partner Mark Dawkins, whose firm operates a salaried model for partners below the equity, says that overall firm performance should not be a factor when determining bonuses.
“We’ve moved away from just profitability,” he says. “For us it’s about making sure we’re recognising through rewards the type of behaviour we want our partners to display.”
The survey also shows that there has been a reduction in both salary and bonuses for support staff, in particular in finance, IT and marketing.
Benefit packages have also taken a hit, with cost control becoming a major issue. Almost a third fewer firms now offer overtime pay compared with last year, while 24 per cent fewer give the option of after-hours travel allowances.
The trend has brought about a rash of innovation for bonus packages, with childcare vouchers, salary sacrifice schemes and access to counselling all becoming increasingly common during the past 12 months.
Kevin Hogarth, HR director at Freshfields Bruckhaus Deringer, says: “We’ve seen pressure on salaries and on costs in the most difficult recession for a generation, so I’d expect to see a greater take-up in flexible benefit schemes as firms try to give people more individual choices.”