Associate Bonus Watch 2012, Biglaw, Bonuses, Money, Tax Law

Weil Won’t Pay Bonuses Until January: Associates See Sinister Tax Motives

Yesterday, Cravath made it rain with a decent bonus scale, especially for those who survived the meltdown. A fifth-year associate at Cravath is making $230,000 in base salary and will receive a $34,000 bonus. Nice work if you can get it. (Actually, it’s not nice work. It’s grueling, soul-crushing. Luckily, most people can’t get it.)

Soon after the Cravath bonuses came out, Weil Gotshal issued some bonus news of its own. The firm is expected to match Cravath, but yesterday Weil announced that it won’t pay bonuses until the end of January, 2013. The timing represents a change for Weil; in recent years, the firm has paid out bonuses in December, not January.

Is it no big deal? Well, if you are a fifth-year expecting a Cravath-level bonus, it could be a huge deal. That bonus is going to push you over the $250,000 mark, and that could make a big difference if we’re talking about 2012 versus 2013…

The note from Weil executive partner, Barry Wolf, was simple enough:

The Management Committee has decided that 2012 Associate bonuses will be paid on January 31, 2013. Evaluation meetings will take place in January prior to the payment of the bonuses. Although the amount of bonuses to be paid has not yet been determined, the Firm remains committed to compensating Associates at market rates.

But people who work at Weil immediately felt like the Weil partners were trying to screw over the associates. We’ve received a ton of chatter about this; here are some samples:

Call me a cynic, but it seems like partners [are] shifting the risk of going over the fiscal cliff and tax rate increases [to associates].

Given the expected tax hikes, the only thing that does is screw associate tax bills for next year (in favor of the partners). Unbelievable.

In a huge slap to the face of associates, Weil just said they would pay bonuses in January. Considering they’ve paid bonuses in Dec the last two yrs…. Weil continues to have deteriorating morale. They have us slaving away in December so our clients can sell companies before year-end; they are painfully aware of the rising tax rates.

Sure, you can file all of this hand wringing under “#2percentproblems.” But one of the fun things about Biglaw is that it constantly pits the 1 percent (partners) against the 2 percent (associates), who are themselves oblivious to the concerns of the unwashed masses working as legal support staff (known as “middle class” in most parts of the country). There are all kinds of class wars going on in Biglaw offices.

That’s why I really like that last comment. When you are working hard to help clients avoid the fiscal cliff, you’re going to really notice it when your employer hip-checks you right over the precipice. One of our tipsters laid out a bunch of possible reasons for Weil to move bonuses from December to January:

A few theories:

1. Tax benefit to partners (get to deduct our bonuses in 2013 rather than 2012, and presumably marginal tax rates will be higher in 2013).
2. Bad budgeting? Weil may have planned for less generous bonuses, and this permits them to recalibrate and also to pay out in a new quarter, presumably with new, better thought-out budget.
3. Switching from seniority-based to merit-based payments? Otherwise, why mention evaluation meetings? Last year, the two were totally unlinked. That will likely be an unpopular move (although a good way to “pay market” but then cut back on a case-by-case basis so they are only paying what they had budgeted for).
4. Retention tool? This way, associates are less likely to leave prior to February-ish (although that defers leaving by about a month, which isn’t much).

In any case, this deferral of payment is really annoying. Besides making it payable in 2013 — i.e., benefit to partners but detriment to associates (assuming marginal rates go up for us) — it means associates don’t have that cash to help defray their end-of-year and holiday-season-related expenses, including travel, gifts, last-minute charitable donations, and bonuses to service providers.

So there are a lot of possible reasons for making this change, and none of them seem to benefit associates.

But the firm claims there is no sinister purpose for the change in timing. From a Weil spokesperson:

Historically the firm paid associate bonuses in January in coordination with the associate evaluation process. For the past two years the firm tried out an earlier schedule and paid bonuses at the end of December. This year the firm has decided to go back to its historical practice of paying bonuses in January,

It’s true that back in 2009 Weil paid bonuses in January. Firm sources also tell us that partners were not thinking about their own tax situations by changing the timing of the bonuses. But that statement doesn’t really tell us why the firm did make the change.

Despite the claims that the partners weren’t concerned about taxes when deciding when to pay bonuses, maybe the firm should have thought about how this change would affect their associates? If the firm honestly wasn’t doing this because of tax reasons, maybe they can change it back to December… because of tax reasons. As one associate put it:

Mostly I am amused because this makes the partners look incompetent, with regard to both communication skills and business savvy.

Are Weil partners getting something so important out of this change that it’s worth pissing everybody off? Or did they just not fully think this through?

We’ll keep an eye on Weil and all the other Biglaw firms. Remember, not all bonus “matches” are equal.

Earlier: Breaking: Cravath Announces Year-End Bonuses; Let the 2012 Bonus Season Begin!

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