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Carolingian

Bonus Structure - Small-town firm vs Big Law

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I'm hoping someone can give me some insight into the bonus structures at big law firms (specifically the sister firms). Of course I've looked up the starting salaries for associates (using the NALP directly), and most firms say first-year associates are eligible for bonuses, so that's definitely encouraging.

 

I spoke with a small-town lawyer whose firm uses the following structure: multiply your base salary by 2.5, once you've earned that much in revenue (from your billable hours), any money that comes into the firm beyond that, you get 45%. So, for example, if your salary is $50,000, your target is ($50,000 x 2.5) = $125,000. Let's say your hourly rate is $200 and you work 1100 billable hours (remember, this is small town). Then, after the first ($125,000 / $200) = 625 hours, you're earning 45% of your billable hours, so your bonus would be:

 

1100 hours - 625 hours = 475 hours

475 x $200 per hour = $95,000

Bonus: $95,000 x 45% = $42,750

For a total compensation of: $50,000 + $42,750 = $92,750

 

Is this structure similar to Big Law? Looking at past threads, I've read mentions of "lockstep" bonuses as well as more subjective bonuses.

 

Any insights are appreciated!

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7 minutes ago, Carolingian said:

I'm hoping someone can give me some insight into the bonus structures at big law firms (specifically the sister firms). Of course I've looked up the starting salaries for associates (using the NALP directly), and most firms say first-year associates are eligible for bonuses, so that's definitely encouraging.

 

I spoke with a small-town lawyer whose firm uses the following structure: multiply your base salary by 2.5, once you've earned that much in revenue (from your billable hours), any money that comes into the firm beyond that, you get 45%. So, for example, if your salary is $50,000, your target is ($50,000 x 2.5) = $125,000. Let's say your hourly rate is $200 and you work 1100 billable hours (remember, this is small town). Then, after the first ($125,000 / $200) = 625 hours, you're earning 45% of your billable hours, so your bonus would be:

 

1100 hours - 625 hours = 475 hours

475 x $200 per hour = $95,000

Bonus: $95,000 x 45% = $42,750

For a total compensation of: $50,000 + $42,750 = $92,750

 

Is this structure similar to Big Law? Looking at past threads, I've read mentions of "lockstep" bonuses as well as more subjective bonuses.

 

Any insights are appreciated!

If that’s how it worked on Bay St, first year associates would be pulling over $300k.

From what I’ve gathered, associate bonuses often are some percentage of base salary with all sorts of discretion thrown in for what firms want to do. I don’t believe there is any standard structure.

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It's not a coincidence that [your salary] divided by [your target] is exactly 40%. When you earn 45% of everything thereafter, you are essentially getting a 5% bonus. 

In a (small) firm environment, tying your compensation to how much work actually comes in and how much money is actually collected makes logical sense from a management perspective. The more important part is to ensure that there is no funny business in counting your hours (ie. if a Partner writes down hours on a file, how does it affect your target hours?)

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Bonuses vary on Bay but a somewhat common structure is a percentage of your base salary depending on how far you are above your target. That being said, things are fluid these days. My firm moved this past year to also going in 5% increments instead of 10% and adding more subjective considerations to bonuses.

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