Should you implement a bonus system in your law firm?

Bonus systems and law firmsIncentivizing law firm employees is something most law firms should at least consider.  Should employees be paid a straight salary without the opportunity for bonuses?  Or, should law firms make the pay largely incentive based, especially as it relates to the lawyers?  These are questions many law firms struggle with as they consider the pay structure in their law firm.

In the end, every law firm is different and the dynamics are also different.  Thus, every law firm will have to make the call on their own.  But the idea of bonus systems (and other incentives) is at least worthy of long consideration.

Bonus systems can have the distinct advantage of encouraging employees to be productive.  No matter what metrics are important in your law firm, a bonus system can allow you to reward employees who meet those specific metrics.

In the end, this can be a win-win for the employee and the law firm.  The law firm is able to hit those important metrics necessary for the success of the law firm.  And the employee, at the same time, is able to share in the success of the firm.

On the flip end, the downside of a bonus system is that if the base compensation is not at industry standards, with the idea that you have a great bonus system to make up for it, it might be hard to recruit the best employees.  For many prospective employees, they may view a bonus system as a carrot that you are dangling that they may never reach.  Many employees may also become upset if they do not reach the metrics to obtain a bonus.

So, many prospective employees may simply hear the base salary in the hiring process without giving much consideration to any bonus system your law firm may have.  Many employees may also become sour on the bonus system if it is not obtainable.

This is why a nirvana truly needs to be struck between base pay and incentives.  A combination of both may be a good formula for many law firms.

If you decide to have a bonus system, here are a few considerations to keep in mind:

  • The less complex the bonus system, and more objective it is, the more likely employees will appreciate the bonus system, be lured to work for you because you have it and then strive to meet it.
  • The bonus system needs to be obtainable by the employees to meet if they work hard and stay focused, but it cannot be a “give me” at the same time.
  • The bonus system needs to be setup in a way that the law firm can financially afford to pay it should the employees meet it.

If you decide to have no bonus system at all, the question you have to ask is what incentive will employees have to be productive and help meet those important firm metrics?  Some exceptional employees are self-motivated to be productive without any kind of incentives.  They want to succeed just because they want to do a great job for the firm’s clients and the law firm.  They may also want to advance within your law firm or working hard in the hopes of an increase in their base pay.  But, for many employees, this will not be the case.

If you have any thoughts, feel free to share them below.

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