In partnership with People in Law, Innecto Reward Consulting recently conducted a survey on bonuses in the legal sector. The highlight report, which can be downloaded here, explores how law firms currently design and deliver bonus schemes, and how that might need to evolve over time.
Bonuses help firms attract and retain talent and drive productivity and profitability by motivating strong performance. They also boost morale by recognising contribution, and in doing so help align individual goals with the firm’s overall strategic direction and objectives.
Traditionally, in the legal sector they have been tethered to fee-earners’ billable hours. Where available, bonuses for business service roles have typically been linked to a firm-wide profit share arrangement, but over the past few years we’ve seen change, moving away from the cultural biproduct of encouraging longer working hours (which can discriminate against women and part time workers) to a new model that encompasses other elements of contribution. So why the rethink?
A regulatory wave of pressure
There is a growing spotlight on how bonuses are determined, partly because of regulatory pressure and also due to shifting employee expectations. The forthcoming EU Pay Transparency Directive (EUPTD) is accelerating this focus: survey data shows that 80% of Europe/global firms are planning to review their bonus schemes in the next 18 months, compared with only 36% of UK-only firms.
Firms tend to agree on the purpose of bonuses but the way they’re delivered varies dramatically. This disconnect between policy and execution fuels inconsistency and can undermine trust. More than ever, employees want to understand how their bonus is being decided, which can create tension with senior leadership if they want to retain the ability to apply discretion or flexibility.
Key challenges facing the sector
This evolving situation is pushing firms to ask deeper questions around fairness, clarity and cultural impact, and to ensure their schemes can withstand both internal and external scrutiny.
Our survey found six key themes emerging:
- Bonus schemes remain focused on individual reward - most firms still tie bonuses directly to personal performance, particularly for fee earners where schemes typically hinge on billable hour thresholds. However, stakeholders are now starting to question whether this narrow focus limits collaboration, inclusion or sustainable performance.
- Fairness, transparency, and broader contribution are gaining ground - more firms are rethinking bonus eligibility, especially for business support staff. Interestingly, bonus achievement rates for business support are higher than for fee earners, particularly at mid and senior levels. This may reflect more discretionary or flexible criteria, which can help managers reward contribution, but it also creates risk. Without well-defined performance frameworks or behavioural metrics, bonus decisions can feel opaque, affecting perceived fairness.
- Discretion is common but rarely questioned - almost 90% of firms apply discretion in some form but few have a system in place to track fairness or test for bias. This increases the risk of inconsistency and unconscious bias. It also goes against transparency.
- Financial metrics dominate - despite talk of values, ESG, or inclusive culture, few firms have embedded these concepts into their bonus metrics. Hard outputs (revenue, chargeables, financial performance) are consistently rewarded over softer, longer-term or team-based contributions.
- Recognition is underused - around half of firms do not operate a formal recognition programme, although many are offering low-profile, low-budget schemes. This is a missed opportunity in terms of boosting retention and morale.
- Change requires value definition - many legal firms express an interest in evolving their bonus design but translating that intent into action is difficult without placing a value on the ‘softer’ contributions delivered by non-fee-earning roles.
The way forward
As legal firms aim to build more integrated cultures, there's an opportunity to revisit bonus design, aligning it more clearly with firm-wide priorities such as collaboration, innovation and operational excellence, and ensuring it sends consistent signals across the organisation.
These shifts reflect a broader trend towards what Innecto calls the Employee Business Proposition (EBP): a more holistic view of how organisations reward not just performance, but the value people bring to the business. In short, when bonuses recognise what matters, and not just what’s measured, they become more than pay, they become strategy.
Some of the most pressing questions centre around fairness and transparency, the rethinking of performance criteria, how innovation and tech can be incorporated and - tellingly – whether companies currently have the capacity to deliver change to their schemes.
That is why we continue to support HR and Reward leaders across the legal sector with consultative insight, tech tools and strategic framing to lead and deliver change.
With tangible experience of supporting organisations in the legal sector to review, revise and recreate their bonus plans, Innecto can work with you to explore how your bonus strategy fits within your wider reward approach and ensure you are driving the desired outcomes.
Get in touch to speak with one of our consultants today >>
