US law firms offer staff $50,000 for referrals as talent wars rage

London’s ‘magic circle’ law firms have almost all significantly increased salaries for newly qualified lawyers. Photo / Krisztián Miklósy

Top law firms in the US are offering their junior lawyers as much as $50,000 (NZ$81,400) to refer acquaintances for jobs, as a renewed war for talent in the industry shows no sign of abating.

A&O Shearman introduced a $50,000 bonus for US associate referrals in May, the same time its merger between the UK “magic circle” firm Allen & Overy and New York’s Shearman & Sterling went live, the firm said.

Kirkland & Ellis recently renewed its $50,000 payment until January 2025, according to a person with knowledge of the scheme, extending a global policy introduced in October last year. The firm previously offered referral bonuses of $25,000.

While most top law firms, like many large corporates, have typically offered referral bonuses as part of their recruitment strategy, the size of such payouts increased in 2021 and 2022 amid high demand for lawyers in a frenzied market for mergers and acquisitions.

Some law firms were also paying junior lawyers six-figure sign-on and retention bonuses.

After a slow 2023, the war for talent has picked up again this year, particularly in London where the UK magic circle law firms have almost all significantly increased salaries for newly qualified lawyers to £150,000 (NZ$319,000) in a bid to compete with their US rivals.

The increase and extension of large bonuses for referrals are in keeping with that trend, according to recruiters.

“The referral bonuses are not new...what has been different is the $50,000 amount that has caught the attention of the industry,” said Katherine Loanzon, managing director at legal headhunter Kinney Recruiting in New York.

“Usually, other firms have provided referral bonus amounts between $20,000 to $50,000, with $50,000 being an outlier.”

US law firm Goodwin has offered associate referral bonuses of $30,000 in its offices outside America and $50,000 in the US since 2021, according to the firm.

Paul, Weiss, Rifkind, Wharton & Garrison also offers associates $50,000, according to a person with knowledge of the scheme. Paul Weiss declined to comment.

In the UK, one magic circle firm pays associates £15,000 for the successful placement of referrals, while lower-tier firms can be closer to £5,000, according to people with knowledge of individual firm offerings.

While an introduction to a firm through an existing employee might seem like an advantage, associates should not rely on referrals at the cost of their own search efforts, according to Nathan Peart, who runs associate hiring at legal recruiter Major, Lindsey & Africa for Europe, the Middle East and Africa.

“It makes complete sense to have multiple sources of talent pipeline available to you from the firm perspective, but associates should be cautious of this approach,” said Peart.

Some firms are also conscious of how such referrals can affect diversity — associates may refer friends similar to themselves — and therefore try not to rely too heavily on such schemes.

“Whether this increases the number of internal hiring through referrals versus using a search agency is yet to be seen,” said Loanzon.

“Providing internal referrals to earn the $50,000 bonus takes a lot of time out of a billing associate’s day, and just because they referred their friends doesn’t mean the friends will join.”

Written by: Suzi Ring in London and James Fontanella-Khan in New York

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