Associate Bonus Watch (and Salary Thaw): Allen & Overy

Cheerio, old chap! This week brings news of bonuses — and a salary “unfreeze” — in the New York office of Allen & Overy.
Allen & Overy — a global mega-firm with over $2 billion in annual revenue, headquartered in London but with a worldwide footprint — is making a go of it here in the United States. And, as reflected in this latest news, A&O intends to play with the big boys in New York. They’re paying market-level bonuses this year.
And, effective January 2010, they’re paying market-level salaries. The increase in salaries undoes the salary freeze from earlier this year. Green shoots?
But there is a catch. Read the full memo, from New York managing partner Kevin O’Shea, after the jump.


What prompted the salary unfreeze / thaw? O’Shea’s memo identifies a few factors, including (1) dissatisfaction with the pay freeze and (2) an uptick in business:

I know that there is a high level of dissatisfaction among you with the current situation on compensation.

Although the market remains fragile, we in NY seem to be bucking the trend and have been performing reasonably well since August. This is a tremendous result and is attributable to many individual and group contributions. I am therefore very pleased to announce that we will be increasing salaries effective January 1 and that bonuses will be paid for 2009.

With respect to that salary bump, here’s the catch:

In addition to rewarding our attorneys competitively, it is important that we are also comparable with respect to the expectation on billable hours. With this in mind, we will be increasing the annual billable hours expectation to 2,000 effective January 1, 2010.

And one tiny observation on the bonuses. Members of the most senior class on the scale, the class of 2002, will get $32,500. That’s in between the Cravath scale, which pays $30,000 to 2002 grads, and the Sullivan & Cromwell scale, which pays them $35,000.
Finding oneself between Cravath and S&C? That’s not a bad place to be.
Happy Holidays, A&O folk!
ALLEN & OVERY — MEMORANDUM — ATTORNEY COMPENSATION
Hello everyone, I want to share with you what is happening on attorney compensation, a subject I know is on the top of your minds.
First, I want to acknowledge and thank you all for the hard work and support to our clients that everyone has given over the past year. These have been unprecedented times and it is that background which resulted in our decision to implement the restructuring earlier this year and also to freeze salaries in order to minimize the number of redundancies we would have to make. When we announced these measures, our commitment to you was to watch the market and then address compensation in light of the market this January. I know that there is a high level of dissatisfaction among you with the current situation on compensation.
Although the market remains fragile, we in NY seem to be bucking the trend and have been performing reasonably well since August. This is a tremendous result and is attributable to many individual and group contributions. I am therefore very pleased to announce that we will be increasing salaries effective January 1 and that bonuses will be paid for 2009. We have done extensive research and believe our overall compensation package is now in line with our competitive market group of firms. Related to this, and our desire for continued growth and success, is the expectation that your commitment also must remain in line with that market. Accordingly, we will be increasing our hours expectation so that we are comparable with our peer firms in all respects.
BONUS
Bonuses will be paid to those in good standing at the time of payment and will be subject to the usual pro-rations for part-time schedules and unpaid leaves of absence. Lawyers more senior than the class of 2002 will be contacted separately regarding the amount of their bonus. Bonuses will be paid on January 8.
Class of 2008: $7,500
Class of 2007: $10,000
Class of 2006: $15,000
Class of 2005: $20,000
Class of 2004: $25,000
Class of 2003: $30,000
Class of 2002: $32,500
BASE SALARIES
Effective January 1, 2010, we will be paying regular full-time New York attorneys in line with the market rate for their class year as noted below:
Class of 2009: $160,000
Class of 2008: $170,000
Class of 2007: $185,000
Class of 2006: $210,000
Class of 2005: $230,000
Class of 2004: $250,000
Class of 2003: $265,000
Class of 2002: $280,000
Lawyers more senior than the class of 2002 will be contacted separately regarding the amount of their salary. The first payment at the revised level will be included in the January 15 pay check.
BILLABLE HOUR EXPECATIONS
In addition to rewarding our attorneys competitively, it is important that we are also comparable with respect to the expectation on billable hours. With this in mind, we will be increasing the annual billable hours expectation to 2,000 effective January 1, 2010. As is the current practice, the level of actual hours achieved will not impact on the bonus. We fully recognize that the achievement of this level of hours it is not always in the attorney’s control and depends on the flow of work coming into the business. However, we encourage everyone to be conscientious in volunteering for work both within your existing practice group and across the office so that we can better manage the flow of work and more evenly distribute work.
We are also keen to raise our efforts with respect to pro bono and would encourage everyone to spend up to 50 hours a year on pro bono work. Up to 50 hours of qualifying pro bono work will be counted towards the hours expectation. Pro bono projects which require over 50 hours will be possible but will need pre-approval by the pro bono committee. Please note that this approval is not necessary for the existing commitments that some of you have to pro bono.
The firm’s busyness reports will continue to use 1,750 hours as the global benchmark. Achievement of the 2,000 hours target therefore equates to busyness of 111% (excluding pro bono hours).
On behalf of all the partners and the firm, I would like to thank each of you for the contribution you have made to the business over the last year, and in particular in supporting our clients in the current economic conditions.
Thank you and best wishes to you and your families for the holiday season.
Kevin

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