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Compensation: bonuses trump salary increases during Covid

Law firms have been rewarding staff with regular or ‘spot’ bonuses, to make up for pay cuts or freezes made when the Covid-19 first hit. Ashleigh Webber looks at pay strategies during the pandemic.

According to a panel discussion on compensation at the People in Law Conference, many firms have reinstated pay reviews they had planned to implement in the first half of 2020, albeit later in the year or at the beginning of 2021.

Bonuses have been paid in many cases, however some firms paid out smaller sums or targeted their pay outs based on individual performance.

Phil Hough, a director within the rewards and data software team at Willis Towers Watson (WTW), said the legal sector’s initial reaction to the Covid-19 pandemic was to put a hold on salary reviews, but their fears about profitability were not founded.

“This resulted in a good proportion of firms reinstating their 2020 reviews for either later in the year or at the beginning of 2021,” he said.

However, WTW research found that for more than half of firms this approach has remained in place for support staff. Just over a third say it continues for fee earners.

Polina Pavlova, associate director at WTW, said 70% of firms had a review of some sort, but were given a tighter budget to work with.

“Where that was the case we saw [firms] allocating increases where they felt it was most needed, for example where salaries were deemed to be below the market [average] and for those who had been recently promoted, those who are key to the business, and those who were a high flight risk,” she said.

Bonuses over salary reviews

Bonuses were used to a slightly lesser extent than other sectors such as finance and technology, as is traditional for law firms, but some staff received their normal bonuses as confidence recovered towards the end of the year.

“Some firms have adopted the use of special spot-bonuses to individuals who have perhaps gone above and beyond during these hard and challenging times,” said Hough. “I’ve heard of these in other sectors and it’s interesting that they’re suddenly starting to appear in the legal sector.”

Hadland questioned some firms’ decision to reward fee earners, while ignoring support staff.

“It was very disappointing to read a headline that said client facing staff were to receive bonuses and nothing about support staff,” she said. “That really took me back a lot of years and I’d thought we’d got over that. No law firm can work without everybody in it.”

Remote working and compensation

Asked whether they felt increased remote working would have an impact on the salaries firms offered in 2021 and beyond, the panellists said it was already being discussed.

Hough said: “A quarter of firms are looking at or considering policies that might impact the level of pay employees receive, perhaps with an increased focus on regional pay.

“In the accounting sector there have been incidences where pay has gone down, and that’s simply because an individual has moved to a different location. It’s slightly different in the legal sector as there are fewer regional office networks.”

Hadland said the extent to which legal professionals will be able to work remotely in the long term would depend on the nature of the work they were doing and would be limited by where clients and referrers conducted their business.

“If people want to work from home for between three and five days a week that’s going to seriously impact their ability to contribute to any kind of activity that requires on-site presence,” she said, suggesting that this would likely be reflected in the salary they are offered.

Pay reflecting responsibilities

However, firms will need to take into account employees’ responsibilities in their pay packets, regardless of where they work, said Amber Cunningham, a consultant in the legal and professional services division at executive search firm Odgers Berndtson.

“You need to pay for the job that somebody is doing…it’s about their role and the demands and the pressures of that job,” she said.

Other factors that could have an impact on remuneration in 2021 are the impact of Brexit and the ongoing effect of Covid-19 restrictions.

“There’s still an element of caution and we’re still in a world of unknown. Brexit is resolved and it’s still a bit messy, but we still don’t know the extent to which Covid and Brexit combined will impact the economy,” said Hadland.

“I do wonder the extent to which pay reviews are going to be conflated with the pay cuts that [employees] took and the extra work they put in. People worked very hard for a very long time so I think there’s a high expectation that [it’s] resolved with bonuses or spot-bonuses.”

Paying back furlough

Having taken advantage of the furlough scheme to retain staff who would’ve been affected by the initial downturn in business in areas such as conveyancing, firms are aware of the public pressure on profitable organisations to pay back any public money claimed.

Cunningham said: “[There is the public perception] of fat cat big city firms furloughing their staff and taking government money, with partners still potentially earning way higher than the average.

“There’s been a U-turn [among some], with either firms ring-fencing that money or consciously paying that money back.”

Shoosmiths, which used the furlough scheme for some employees in its residential teams, has set aside the grants it received with the aim of paying it back when the coronavirus storm had passed.

“Notwithstanding the debate that whether as a profitable law firm we should, we took it back to what the purpose of the furlough scheme was, which was to keep people in jobs,” said Hadland.

“At Shoosmiths we have a huge residential team… we would’ve probably had to make a lot of people redundant very quickly [had furlough not been there when conveyancing work stopped] and would’ve been in a position to rehire those people in three months [when it picked up again]. It would’ve cost us a huge amount of money and would’ve totally disrupted client service.”

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