By Xiumei Dong

Law360 (October 7, 2020, 8:17 PM EDT) -- While some wealthier firms are throwing extra money at associates for their work during the pandemic, many firms are staking their bets on bigger year-end bonuses to retain talent, legal industry observers say.

BigLaw firms have always competed intensely to attract and retain associates with generous bonuses, but the uneven impact of the virus has allowed some firms to step up their games with the offering of "special fall bonuses."

Since mid-September, about a dozen law firms, including Cooley LLP, Davis Polk & Wardwell LLP and Milbank LLP, have announced bonus payments to attorneys for their work during the pandemic, giving out base cash awards of up to $60,000.

Meanwhile, a handful of others — such as Cravath Swaine & Moore LLP, O'Melveny & Myers LLP and Kirkland & Ellis LLP— have decided not to follow suit but have indicated that they are likely to offer a bigger year-end bonus, according to recent reports on legal blog Above the Law.

Historically, many large law firms have taken their cues from Cravath in determining whether to raise pay for their new attorneys, and how much, but this year firms seem divided on how to reward their associates.

"What's interesting about this is that we're finally seeing some sort of stratification in the market," said Kate Reder Sheikh, a Bay Area-based managing director in the associate practice group at Major Lindsey & Africa.

Reder Sheikh explained that for the last three or four years, the market had been a "pretty level playing field" for the AmLaw 100 when it comes to offering competitive pay for the top talent. But that could soon change, she said.

"Between the COVID salary cuts and the bonuses either being awarded or not awarded in the fall [and] potentially bigger winter bonuses, what we're seeing is there's actually a meaningful difference between going to firm A and firm B, whereas eight months ago there wasn't," she said.

With law firms divided on the fall bonuses and a mix of pay cuts instituted by some earlier in the year, Reder Sheikh said the pay disparity may motivate some associates to consider new employers once they have gotten year-end bonuses.

And of course, they'll most likely want to join those that have demonstrated greater financial stability during the pandemic.

"Initially, the bonuses started out as 'thank you for your service' but now it's become a marketing tool for many of these firms because they want to show that they are keeping up with all of the other firms in the markets," said Ru Bhatt, a New York-based partner in Major Lindsey & Africa's associate practice group.

Bhatt said that some associates, particularly junior associates, have been working harder and longer hours since COVID-19 lockdowns eliminated the separation between the office and home, and bonuses can help keep them from eyeing greener pastures.

"We've been hearing a lot from junior associates that also are interested in making a move, and I think that the bonuses are part of that to help with retention as well, right?" Bhatt said.

According to Robert Kamins, a former BigLaw chief operating officer who founded consultancy Vertex Advisors Group, firms that are offering the fall bonuses tend to have robust capital markets or restructuring practices that are in high demand. Some of the smaller firms and boutiques have also been using the opportunity to say they are doing just as well as the BigLaw firms, he added.

"I think firms are very smart to figure out ways, including financial, to reward [associates]," Kamins said. "If you think about the end of the day, for the law firm what they sell is the minds and talents of the people and so you have to retain those people, and the partners are the owners, so they have to reward the labor."

With the financial uncertainty that remains ahead, however, Kamins said many firms are holding off on announcing bonuses until they have a full financial picture of the year.

This will likely have the added effect of keeping associates from jumping ship until after bonus season.

"So it could be sort of a long hurry up and wait, where associates are going to hang around and see if they are going to actually receive a significantly above market winter bonus," Reder Sheikh said. "But that may keep them in their current firm until February or March of next year."

While associates value competitive pay, firms do have other ways to reward them, said Kent Zimmermann, a principal at legal industry consultancy Zeughauser Group.

"It usually doesn't make sense for an associate to go across the street for the amount of money that we're talking about in these bonuses," Zimmermann said, pointing to other influencing factors such as billable hours goals, work-life balance and long-term career development.

Agreeing with Zimmermann, Kamins added that there are many ways for firms to show appreciation for associates beyond just money, including investing in training and professional development, providing flexible leave policies and offering a concierge type of family support.

"Those are the things that are a long-term investment in their own careers that matter more than short-term bonuses," Kamins said.

--Editing by Orlando Lorenzo.

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