Bonuses for staff at major US and UK law firms, which hit record highs in 2021, have dried up, according to the industry’s largest recruiters, as the legal sector suffers a sharp drop in deals.
The six-figure sums paid to junior lawyers as sign-on or retention bonuses are all but gone by the end of 2022, said Michelle Fivel, a partner at recruiter Major, Lindsey & Africa, whose firm places employees in many of the top 200 international firms.
“We’re not dealing with a hectic market like 2021,” she said. “The companies then had to do it, they had no choice because their competitors were doing it and they really believed they were losing candidates.”
Bonuses peaked in 2021 when Kirkland & Ellis, the world’s top-grossing law firm, offered $250,000 to mid-level attorneys with job openings elsewhere, according to a recruiter. Another company offered $100,000 in sign-up bonuses, Fivel said.
Two other leading U.S. law firms, Paul Hastings and Goodwin Procter, offered referral bonuses of $50,000 and $50,000, respectively, to attorneys who were referring new hires at the time.
But a rise in interest rates has led to a sharp drop in business deals and dozens of job losses at Silicon Valley firms like Cooley, Stroock & Stroock & Lavan, Goodwin Procter, Davis Wright Tremaine, and Shearman & Sterling.
A Thomson Reuters Institute survey released last month found that US attorneys were billing fewer hours than they had for decades in the year ending November 2022, according to data from Decipher Investigative Intelligence, which provides law firms with market insights that the number of staff turnovers per year 2022 has fallen by 14 percent compared to the previous year.
London-based headhunter Chris Clark, director of recruiter Definitum Search, said they “closed three associate deals in October where the new firms may have previously bought them out of their bonus. This time they all waited until the employees received their late December bonus before quitting and therefore delayed their start.”
At the height of the hiring frenzy, a UK firm paid $250,000 to a star employee who was considering going to a US competitor, Clark said, while top US firms paid signing bonuses of between $20,000 and $120,000 in London.
Another London-based firm paid an employee a £225,000 bonus when they quit, Clark said, and increased his salary to the same amount.
At the same time, lawyers took home two rounds of “special bonuses” in 2021, in addition to their usual year-end payouts, as cash-flush firms thanked employees for their hard work during the pandemic and pushed total earnings to a new record this year in many cases.
“The excessive bonuses and raises in 2021 are gone for now as the market has cooled,” Clark added.
Freddie Lawson, a recruiter at Fox Rodney, said: “Staff hiring has cooled to what I would say normal levels and that includes the use of sign-on or retention bonuses. While we have seen them used in exceptional circumstances, they are certainly not the norm now.”
While 2021 may have been an anomaly, sign-up bonuses are unlikely to be a thing of the past, according to Major, Lindsey & Africa’s Fivel.
“There’s a feeling things could pick up sometime this year, whether [in the] third or fourth quarter,” she said.
https://www.ft.com/content/a7d2447c-d951-42b6-aedf-5769ce7d58bd Attorneys’ six-figure bonuses are drying up as job cuts gather momentum