City lawyers gear up for US firms’ bonus season amid pay war
Lawyers at US law firms across the City are poised to receive their bonus payouts following another year of fierce competition in the industry.
In a year that saw US law firms Quinn Emanuel and Gibson Dunn and Paul raise their pay for newly qualified lawyers to £180,000, the salary battle shows no signs of slowing, explained Ria Karnik, managing director at Major, Lindsey & Africa to City PM as part of Eyes on the Law.
“We could potentially be heading into what may turn out to be another busy year, or an even busier one,” she said, adding that if the market follows this trajectory, it will “spark another pay war, which US firms are well positioned to handle—perhaps even better than others.”
“It’s become increasingly clear that lawyers are the new bankers,” noted Karnik.
US firms follow the Cravath scale, a lockstep system of associate compensation based on years of post-qualification experience. This ensures that most associates have a clear understanding of what their year-end bonus will be.
Karnik explained that bonuses range from $10,000 to $15,000 for first-year associates, rising to as much as $90,000 for those in their fifth year. She pointed out that most US firms distribute bonuses at year-end, in contrast to the mid-year payouts favoured by many British firms.
She argued that this transparent payment structure gives US firms an extra edge in the pay war.
“It’s essentially: ‘This is what we expect from you, and this is what you’ll receive in return,’” she said. Adding “I think this approach is starting to frustrate those who work outside this framework.”
She continued: “You can work incredibly hard, but because of the way fee structures are arranged, you might have to write off significant hours. If you don’t hit the required target hours, you simply don’t get a bonus.”
Eyes on the Law is a weekly column focused on the legal sector.