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Louisiana firm bases attorney bonuses on amount collected

A Louisiana firm set up an attorney bonus program that rewards not the amount billed but the amount collected.

It is attorney-specific, which means the good performers get rewarded accordingly.

And the payouts are given every quarter.

The program rewards the quality producers, the attorneys who not only put numbers on the books but whose efforts and billable hours turn into income for the firm.

Salary x 3 = bonus eligibility

The rule is simple: to get a bonus, the attorney has to bring in three times more money than the salary amount for the quarter. And the salary includes pay, benefits and all the perils.

To get that figure, the manager divides the attorney’s annual package by four. Thus, if an attorney’s total annual compensation is $100,000, the quarter baseline is $25,000, and the attorney has to bring in at least three times that, or $75,000 per quarter, to qualify for a bonus.

The amount the firm pays out, however, is not so rigid. That is left to the discretion of the partners. The only rule is that the firm has to show a profit for the quarter before any bonuses can be given out.

What the partners do is set a pool to draw from and the amount depends on the firm’s profitability for that quarter. If the quarter’s profit comes to, say $200,000, they might decide to pay $20,000 of that in bonuses.

Then to determine how much each attorney gets, they look at the individual revenues and in general the higher the revenue, the higher the percentage of the bonus amount.

But the amount is based not just on numbers. The partners look too at the attorney’s general performance and team participation. So if Attorneys A and B bring in the same profit but A has been a team player while B has been difficult for staff and other attorneys to work with, A winds up with more money.

A better way to build revenues

The benefits come from several corners.

Rewarding the attorneys according to their individual performance is a good way to improve the bottom line, because it gives each attorney an incentive to work at top speed.

Bu contrast, an across the board bonus can’t do that because the people who aren’t as exceptional get the same reward as the ones who are.

In addition, basing the reward on revenues as opposed to billed hours eliminates false productivity. The emphasis is on bringing in money, not on beefing up the hours.

The plus of quarterly payout

Giving the bonuses quarterly instead of annually has advantages as well.

One is that the firm is constantly aware of every attorney’s performance and so can address downfalls immediately.

Another is that it forces the attorneys to keep a constant watch on the profits, which means the overhead is always kept at a comfortable level.

More still, the associates always know where they stand with the firm, and when someone starts failing under the three times the salary rule, there’s no false expectation of a bonus.

Beyond that, the constant bonuses help eliminate the common problem of associate turnover. Many a firm invests in training an associate only to lose the attorney to another firm offering just enough to entice that person to leave. The quarterly reward serves as an ongoing extra edge on competitiveness and makes other offers seem not so attractive. Even better, the associates know that if they perform well, the sky is the limit for their compensation.

If your law office has a system that helps operations run smoothly, Law Office Administrator would like to write about it. Contact the Editor at catherine@plainlanguagemedia.com. We pay $100 for every idea we write about in this column.


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