The world’s largest professional services firms and banks have sought to avoid a retention crisis among the overworked juniors by handing out luxury gifts and generous bonuses after a great year of earnings.
Elite US law firms, including Davis Polk & Wardwell and Simpson Thacher & Bartlett, have announced one-time payments of between $ 12,000 and $ 64,000 for associates in recent weeks in recognition of hard work during the pandemic. The rewards are in addition to the separate Covid-19 bonuses distributed towards the end of last year.
Payments follow wave of departures among junior lawyers and other professional services workers who complained about long and insulating working hours during the pandemic. They are also made possible by a boom in law firm profits during the crisis, as clients sought advice on corporate restructuring and closing deals.
“It’s no secret that associates have worked countless hours and are on the verge of burnout,” said Nathan Peart, general manager of associate recruitment at Major, Lindsey & Africa. “Businesses take action and money is a starting point.”
He warned, however, that retention bonuses or “golden handcuffs” would trigger “a bidding war” for talent.
Since early March, a series of US law firms have matched Davis Polk’s bonus scale, including Latham & Watkins and Goodwin Procter. Associates will be paid on the basis of seniority and hours worked.
At Goodwin, for example, associates will be paid in two installments, in July and October, but will need to have billed at least 1,850 hours to qualify. Young lawyers in the UK, US, Hong Kong and Luxembourg will be eligible.
Money is not the only incentive. Investment bank Jefferies has offered staff a choice of perks, including a Peloton bike, mirror, or Apple products, while Davis Polk employees can opt for luxury gifts, including wine packages or a shopping spree. Credit Suisse has said it will pay a $ 20,000 bonus to entry-level employees, while others have pledged to hire more staff to ease the burden on existing employees.
In the UK, lawyers said they were also offered secret ‘gold handcuff’ bonuses intended to prevent them from leaving for rival firms. A partner at a mid-level law firm told the Financial Times they had received a one-time payment of £ 5,000 which would have to be returned if they left within the year.
The lawyer said: “While having to pay it back would be painful, I’m not sure it’s enough to achieve his goal – especially when the difference in salary or the potential signing bonus elsewhere makes up for it.”
Mark Jungers, headhunter at top US law firms, said: “Partners cannot be easily replaced. If an associate billing 2,500 hours per year leaves, you must allocate those hours to other people. If two leave, it starts to become a problem. “
Leading investment banks and law firms in particular have been overwhelmed with work over the past year.
The pandemic has sparked lucrative restructuring mandates, while there has been an unexpected labor boom related to private equity operations and special acquisition vehicles. US giant Latham & Watkins reported worldwide sales of $ 4.3 billion last month, a recording for an American law firm.
This growing demand put pressure on junior staff, who began to vote with their feet. According to data from Leopard Solutions, the gap between lawyers entering the top 50 U.S. firms in terms of turnover and those leaving has reached its narrowest point in four years in 2020 – with just 306 more partners who join that leave.
International law firms have unveiled modest bonuses for global staff. Linklaters will pay workers around the world, excluding partners, 5 percent of their wages, like others, like Herbert Smith Freehills and others.