Pay Disparity and the Enviable Bonus
Following on from the success of our annual Fellows and Associates Salary Survey Michele Fellows thought she would address a topic not touched upon within the survey itself but raised via feedback to us. That of the bonus.
In section 3.5 of the Salary Survey we state “it is still more lucrative to work in industry once qualified for a few years than it is to work in private practice”. A newly qualified attorney practising in industry contacted us to query this and some interesting points were raised during my discussion with him. This attorney suggested that his experience was very different and that whilst his basic salary was likely to be higher than those in private practice, once a bonus was included it was not the case at all. He understands, anecdotally, that private practices regularly offer substantial bonuses with often easy to achieve targets, such that overall packages are surely more lucrative in private practice, rather than as we submit – in industry.
The attorney is quite correct, however only in some instances. There are also a significant number of private practice firms that do not subscribe to substantial bonus structures, for the time being anyway.
Recent economic conditions have forced companies to review their pay structures and allow for more flexibility in financial commitments. When tougher fiscal conditions prevail, it behoves firms to consider their overheads and make themselves more cost effective and efficient. No one begrudges paying someone considerable sums if the person in question is delivering exceptional performance, however, having to pay an underperforming employee similar amounts does smart. Designing a salary framework that allows for differing levels of performance is one way to ensure a company does not overextend itself when times are tougher but also allows it to reward those high performers well. Thus partially ensuring valued employees have the job satisfaction we all seek and do not resent working hard while perceived “slackers” cruise along with the same benefits.
And a bonus is just that – a bonus, it is the perfect engine with which to effect performance related pay. It is not a contractual obligation and as such companies have the option not to pay them at all if they deem appropriate, although the consequences to workforce morale and the wider perception of the business’s success should be considered carefully before taking such dramatic action. Well thought out bonus schemes can be configured in such a way so as to be responsive to current conditions and as such recompense appropriately without needing to be changed each time there is economic vicissitude. Correspondingly firms are looking more and more to offer fair but moderate salaries with the potential for compelling bonuses should performance targets be met.
Some firms set fairly low targets, as suggested by the attorney above, such that hefty bonuses are the norm and I would expect this to become increasingly regular in coming months as companies look to attract and keep staff without wanting to commit as much at a basic level. With the result that there will be a widening gap between industry and private practice remuneration packages where the “corporate” performance of a private practice is more closely linked to an individual’s ability. However, this is not the norm as yet. In fact, based on the data collected for the Salary Survey our statement holds true:
At least, not at an average level – we will grant that there were some significant swings but those earning a bonus in excess of 15% had predominantly 2-3+ years’ post qualification experience with a rare occurrence at the newly qualified level. We are also aware of corporate bonus schemes where those with 2-3 years’ post qualification experience are earning in excess of £20-£25k bonuses, so there is no hard and fast rule for all. When we reviewed the data based on specialist field we found that biotechnology, mechanical engineering and telecommunications tended to fair the best of all qualification levels when it comes to bonuses. We have to acknowledge that as we are bound by the information provided by those who chose to participate in the Salary Survey and as such the survey has inherent restrictions.
Bonuses are becoming an ever more important element to remuneration packages for both employees and employers alike, to the extent that when comparing job offers candidates can only truly do so when they are in possession of full offer details – including pension, holiday, other benefits and increasingly influential – the bonus.
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