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US law firms have handed out a bumper round of bonuses to junior lawyers for 2024, as a pick-up in dealmaking lined the industry’s coffers and stoked a renewed war for talent.
Top New York law firms including Milbank and Cravath, Swaine & Moore paid out year-end bonuses worth between $15,000 and $115,000 for the second year running.
This year they also handed out additional “special” payouts ranging from $6,000 to $25,000 — a trend kicked off by Milbank in September and followed by peers at the end of the year, pushing senior associates’ take-home pay at many firms north of $550,000.
Bonus season arrives at the end of the year for US-headquartered law firms, which have benefited this year from a resurgence in deal flow after a tougher 2023. Law firms awarded additional bonuses in the wake of the pandemic, following an unexpected surge in M&A, but fewer firms gave extra payouts to lawyers in 2022 or last year.
Firms paying the top rate this year include Cravath, Swaine & Moore, Paul, Weiss, Rifkind, Wharton & Garrison, and Davis Polk. All three firms declined to comment.
Global M&A picked up in 2024 after deal activity in the previous 12 months sank below $3tn for the first time in over a decade on the back of high interest rates and geopolitical uncertainty. US companies forged more than $35bn in deals on one “merger Monday” this month.
Law firms have benefited from the pick up in transactional work, with an increase in rates above inflation across the board. According to research from the Thomson Reuters Institute, law firm billing rates among the largest 100 US firms were up 8.4 per cent in the first half of the year.
“The rate-driven increase in revenue has translated for many firms into special bonuses for associates, particularly those meeting or exceeding annual hourly targets,” said Bruce MacEwen, president of New York law consultancy Adam Smith, Esq.
“Associates are BigLaw’s supply, and when client demand increases this makes commercial sense,” he added.
The salary scale at the top outfits has remained unchanged from 2023, ranging from $225,000 to $420,000 depending on the year associates graduated.
However, some litigation boutiques have paid bonuses above the benchmark scale this year thanks to a strong disputes market. New York’s Elsberg Baker & Maruri, which launched in February, has handed out bonuses totalling $226,250 for lawyers who graduated in 2017.
In addition to base and “special” bonuses, Pallas Partners, founded by Natasha Harrison, the former deputy chair of litigation powerhouse Boies Schiller Flexner, is giving associates who have exceeded the firm’s 2,000 billable hours target “step-up” bonuses. Lawyers in the role of counsel, the tier just below partner, are eligible to receive as much as $232,000.
UK-founded firms have also followed their American peers on year-end compensation for US-based lawyers. “Magic circle” firms Freshfields, A&O Shearman, Clifford Chance and Linklaters have all matched Milbank’s annual and special bonuses for associates. The firms declined to comment.
The increases in pay come after the group were forced to increase salaries to £150,000 for their most junior lawyers in London this year as US rivals have leveraged their deeper pockets to poach young talent in the UK.
“The US market has outperformed, resulting in bumper bonuses at all levels,” said Chris Clark, a director at London-based legal recruiter Definitum Search. “UK firms must keep pace to remain competitive.”
