May 14, 2013
Law Firm Compensation – Associate Bonus – Fee Split
Question:
Our firm is a 12 attorney firm located in downtown Chicago. We have 8 partners and 4 associates. We are considering making a change to our associate compensation system. Currently associates are paid a salary plus a discretionary bonus at the end of the year. We are considering continuing to pay them a salary plus 60% of any business they bring in (origination). Does this plan make sense?
Response:
I would need to know more about your financial situation, your overhead, and profit ratio. You and your partners should expect to make a profit from your associates. I believe you should expect to realize a profit margin of 25% – 30%. After factoring in firm overhead and associate compensation I don't believe you will be able to give away 60% and realize this goal. 20%-30% may be all that you should incorporate into a bonus system. Be careful that a bonus system such as this accomplishes what you are seeking to accomplish and that you don't create a lone ranger culture.
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John W. Olmstead, MBA, Ph.D, CMC
Posted at 08:21 PM in Compensation
Tags: associate bonus, fee split, Law firm compensation
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