There was further evidence this week that the law firm economic model is changing, as Clifford Chance revamped its associate bonus scheme and removed the direct link between hours billed and amount of wedge pocketed.
The percentage of salary which can be awarded by way of bonus is broadly unchanged. Lawyers with up to 1PQE can get a maximum of 20% and those with more than 1.5PQE a maximum of 30%. While associates with more than 4PQE used to get a maximum of 40%, that increased limit now applies only to those who make senior associate grade. But given that nearly all 4PQE lawyers are made up to senior associate anyway (and certainly all of those who would earn the top bonus) this change is unlikely to affect anyone.
But while the maximum cash payments remain the same, the basis on which it is awarded is widened and will no longer be purely hours-based. A spokeswoman for the firm said that several factors would be considered - hours would be an element, but so would lots of softer stuff like teamwork and effort. So there is the potential at least for associates who win new clients or make major pro bono contributions to earn as much as their colleagues who've simply been beasted on hours.
The development is part of a gradual, but very significant, change in the economic model of law firms. Just as the charging arrangements for clients are moving away from fixed hourly rates, so the archaic PQE based associate lockstep and hours-based bonus are slowly being abandoned. Firms including Shearman & Sterling, Simmons & Simmons, Stephenson Harwood, Field Fisher Waterhouse and Barlow Lyde & Gilbert have all recently adopted more flexible associate remuneration packages.
As the path to partnership at City firms becomes longer and steeper, more flexible approaches to remuneration are increasingly important in the battle to incentivise and retain the best associates.
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The percentage of salary which can be awarded by way of bonus is broadly unchanged. Lawyers with up to 1PQE can get a maximum of 20% and those with more than 1.5PQE a maximum of 30%. While associates with more than 4PQE used to get a maximum of 40%, that increased limit now applies only to those who make senior associate grade. But given that nearly all 4PQE lawyers are made up to senior associate anyway (and certainly all of those who would earn the top bonus) this change is unlikely to affect anyone.
But while the maximum cash payments remain the same, the basis on which it is awarded is widened and will no longer be purely hours-based. A spokeswoman for the firm said that several factors would be considered - hours would be an element, but so would lots of softer stuff like teamwork and effort. So there is the potential at least for associates who win new clients or make major pro bono contributions to earn as much as their colleagues who've simply been beasted on hours.
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Clifford Chance yesterday |
The development is part of a gradual, but very significant, change in the economic model of law firms. Just as the charging arrangements for clients are moving away from fixed hourly rates, so the archaic PQE based associate lockstep and hours-based bonus are slowly being abandoned. Firms including Shearman & Sterling, Simmons & Simmons, Stephenson Harwood, Field Fisher Waterhouse and Barlow Lyde & Gilbert have all recently adopted more flexible associate remuneration packages.
As the path to partnership at City firms becomes longer and steeper, more flexible approaches to remuneration are increasingly important in the battle to incentivise and retain the best associates.