Mother in Law: Bonuses - contentious but crucial

'I hate bonuses,' a friend said to me last week. I nearly spat out my wine. Why did this young, career-focused, conscientious lawyer not like bonuses? 'They cause more trouble than they are worth,' she continued.

After a few minutes of trying to disagree, these comments actually transported me back to circa 2010 when I had been forced, as team leader, into a quasi-trade union rep role as I tried to negotiate a team bonus with our management board. 'The secretaries will get £30, if they work really hard,' I remember telling them after crunching the numbers, 'if I was them I would be offended and do the minimum instead.'

So, yeah, I guess bonuses can be a contentious issue. But I do think they are crucial. I think anything that makes employees feel like they have 'skin in the game' is a good thing. I spent the first five years of my career working at a firm where work itself was to be avoided at all costs. One secretary, every morning, would see how long she could get away with playing Solitaire before she started her working day, and the same after lunch. They weren’t very nice to clients. They put their personal post through the franking machine. Imagine if, one day, their contracts were changed so that their pay would be 10% wages and 90% performance/profit related bonuses? It would change everything.

The type of bonus is key. I worked in a team where the whole culture changed when a significant team bonus was introduced. A team bonus based on the team’s fees. Previously, everyone was stealing work as it came in the door for themselves; suddenly they realised it didn’t matter who did the work as long as it got done, and they supported each other to get it done. It even made the team members more business-like in their approach to recruitment - not wanting to take on people we would have to 'carry' or who didn’t have the same attitude as us - because we would have to share our bonus with them.

This won’t work in every team, and I am not a big fan of firm-wide bonuses either. Because, in some teams, you will be carrying some people. This may be controversial but I do not think you should get a bonus, or a pay rise, if you don’t deserve it. Whether that is because your attitude stinks, or simply because you didn’t reach your fees target. Why should your firm reward you financially if you have not met the financial goals they set for you? This, I think, is true even if you have really good reasons for not reaching your targets. They can’t pay their rent with really good reasons.

I believe both the way your bonus will be calculated and what you have to do to achieve it need to be very clear. I remember a geography teacher who would almost always give me 8/10 in my homework. This made me furious on a weekly basis. 'I’ve done everything you asked me to do, so I should get 10/10' I would say and he would say something about how he gave me that mark so I knew there was always room for improvement. That is not fair - if you set objectives and the person meets them all, then that should be a 10/10. One hundred per cent of the available bonus.

With both fee earners and non fee earners, you should play to peoples’ strengths. If someone is a super fee earner but rubbish at marketing, you need to be making a decision with them on whether they should improve their marketing efforts or, if the business can work around it, just focus on fee earning. I think I would want them fee earning, and their bonus to be based just on their fees. There should be room in the appraisal process for these objectives to be thought out and bespoke.

But, again, the partners can’t pay rent with 'marketing efforts'. They can’t pay rent with 'always answers the phone quickly' or 'good feedback on ReviewSolicitors' or even 'provides great training to junior members of the team'. They pay rent, and you, and themselves, with fees received. Not fees billed, but fees received. And, for the most part, I think bonuses should be based on this. Answering the phone quickly and all the rest of it should lead to successful billing so it doesn’t need to be rewarded on its own.

And how much should the bonus equate to? I know my blog on salaries got at least one reader a pay rise, so I am going to stick my neck out again. If (and I do know it is a big if) your fees target is three times your salary, with the first third being salary, the second third being admin costs and the third being profit, and you meet that target, the firm have already made a profit out of you. If your salary is £50,000 and you bill £150,000, they have already made the £50,000 profit they wanted to make out of you. Therefore, if your bonus is calculated based on what you earn above that target, remember that it is a bonus for them as well as you. I’ve seen bonus schemes where you get 5% or 10% of what you bill over your target. As Deceptively Angelic Child 1 would say 'nah, mate.' It needs to be a lot more than that - tell them I said so.

Some facts and identities have been altered in the above article