Law firms talk a lot about valuing collaboration, teamwork and innovation. But when it comes to bonus schemes, hard metrics have traditionally won out. Fee-earning, personal performance and firm profit tend to be prioritised over contributions to building a supportive culture. But judging someone’s performance on financial contribution ignores a substantial portion of the workforce – business service professionals. And a growing number of firms are becoming aware that the bonus scheme system needs reappraisal and a more equitable system put into place.
A recent report by Innecto Reward Consulting and HR network People in Law found that, while most law firms still rely on established processes to evaluate worth, there is a noticeable shift in mindset towards exploring how to make bonuses more fair, transparent and equitable. ‘Legal sector employers are beginning to re-evaluate what (and who) their bonus plans are rewarding, and whether those incentives genuinely reflect contribution, culture and long-term success,’ it says.
Bonus Evaluation: Rethinking Variable Pay in the Legal Sector surveyed 41 UK and international law firms, including Addleshaw Goddard, Michelmores and Herbert Smith Freehills between February and March 2025, to examine how law firms design and deliver bonus schemes. The professionals who took part spanned HR, reward and people functions, and covered both fee-earner and business support schemes.
It found that, while bonus schemes are evolving across the legal sector, larger or global firms are leading the way, with regulatory pressure, international complexity and talent expectations cited as reasons for the timely review of the efficacy of their schemes. Some 80% of global operating firms are planning to review their bonus schemes in the next 18 months, compared with 36% of UK-only organisations.
Main trends
Bonus schemes remain focused on individual rewards and values. Most law firms still tie bonuses directly to personal performance – in the case of fee-earners, often hours billed. Transparency remains inconsistent, with 38% of survey participants reporting that they did not feel their bonus scheme was transparent. The use of discretion in bonus scheme payouts was widespread. Almost 90% of the surveyed firms apply discretion in some form, yet few systematically check for fairness across groups.
This behaviour ‘impacts a firm’s ability to be more transparent about decision-making, and without careful calibration or data-driven moderation, discretionary decisions risk becoming a source of inconsistency and unconscious bias’, the report says.
Financial metrics dominate, even when firms say they value culture and collaboration. Environmental, social and governance (ESG)-inclusive culture and demonstration of stated ethical values are not concepts that have been widely embedded in bonus metrics. Most schemes continue to reward tangible measurements, such as revenue, chargeables and financial performance, over harder to quantify team-based or long-term contributions.
Recognition is also underused, despite creating strong links to engagement and retention. Around half of those surveyed do not operate a formal recognition programme, and those that do offer low-profile, low-budget schemes. This is a ‘missed opportunity’, according to the report, when strategic, values-based recognition is known to support retention and morale. Some 48% of survey participants are not leveraging the opportunities provided by recognition schemes.
Creating a fairer proposition for all
Despite the persistence of entrenched approaches, expectations of what constitutes a fair, transparent and equitable bonus scheme are changing. Many participants are aware that the current narrow focus could limit collaboration, inclusion and/or long-term performance. A number of firms are rethinking bonus eligibility and oversight, with a focus on how to reward business services professionals. Although transparency remains a challenge, there was clear acknowledgement by survey participants that bonus schemes must become ‘more open, equitable and aligned to modern working patterns and values’.
Measuring what is measurable – the easy option
Although many firms have expressed interest in evolving their bonus scheme design, translating that intent into action is challenging when ‘softer’ contributions are harder to evaluate. Pinning down how ‘value’ is defined and measured across different roles is critical to designing a fair and equitable bonus scheme that rewards people across a firm’s ecosystem. Only 34% of survey participants have explored alternative or non-financial bonus metrics, such as those linked to teamwork, innovation, diversity, equity and inclusion (DEI) or ESG goals.
Survey methods and findings
Innecto Reward Consulting, in partnership with People in Law, explored how law firms design and deliver bonus schemes, what they measure, and where they are heading next. The survey ran during February and March 2025, gathering insight from 41 leading UK and international law firms.
Responses were drawn from professionals with direct oversight of reward –spanning HR and people functions – and covered both fee-earner and business support schemes.
The survey explored:
- Bonus scheme structure and eligibility
- Metrics and measurement
- Transparency and trust
- Challenges, tensions and barriers to change
- Future appetite for innovation and experimentation
Material considered included verbatim responses, client casework, and previous Innecto bonus reviews across the sector.
The report based on the survey findings identified four design principles for a fairer, sharper bonus strategy:
Take a holistic view
Don’t design in a vacuum. Consider the full value proposition – not just base salary – and ensure bonus design aligns with your wider talent strategy. That means understanding what motivates your people at different levels and in different roles.
Build trust
In an environment where discretion is high, transparency becomes critical. The firms gaining traction are those that define clear criteria, apply them consistently, and communicate the rationale behind bonus decisions. Trust is built not just through fairness – but through clarity.
Balance performance measures
The old reliance on financial metrics is starting to shift. While outputs like billable hours still matter, forward-thinking firms are incorporating behavioural indicators (like collaboration or innovation) to reflect broader value. Working with the business to explore how other elements can be measured is key. The trick is to blend the two, without overcomplicating the model.
Watch for unintended consequences
Bonus design can shape behaviour, often in subtle ways. If the scheme rewards hours worked over impact delivered, presenteeism may creep in. If the criteria are vague, inconsistency (and inequality) follows. Effective design means thinking beyond what you’re rewarding, to what behaviours you may be inadvertently encouraging.
Factors to consider when designing a bonus scheme
Law firms must grapple with competing tensions: balancing competitive rewards with financial constraints; ensuring that bonuses are suitably tailored while justified and transparent; and finding the balance between financial and non-financial metrics. A data-driven approach is important to assess the impact of compensation on retention and attraction.
Benchmarking is critical, including setting clear criteria for payments, tracking discretionary decisions and ensuring regular reviews to address market changes. Firms should also consider how desired behaviours can be encouraged, beyond billable hours. They should also factor in whether their bonus scheme encourages any undesirable outcomes, such as presenteeism if the emphasis is on hours worked.
Practical measures include investing in systems and processes to track holistic performance, aligning incentives with business priorities and ensuring that the scheme reinforces teamwork, rather than just focusing on individual performance. Bonus schemes should be monitored for ‘unintended consequences’ such as gaming of the system.
‘Every bonus scheme carries trade-offs,’ says the report. ‘There’s no perfect formula, but there is a smarter mindset: one that recognises bonus design as a lever for influence, not just administration and one that treats fairness and clarity as strategic priorities, not afterthoughts.’ It adds: ‘Firms that succeed won’t be those with the slickest formulas, but those brave enough to reframe what they’re rewarding, and why.’
Design principles
Effective strategy, design and consideration of future direction are the main pillars of a good bonus scheme. It should not be an isolated initiative but be conceived of as part of a holistic talent strategy. Thought needs to be put into what motivates different people in different roles at every step of the ladder. In law firms where the use of discretion in evaluating reward is typically high, transparency assumes extra importance. All stakeholders should be clearly informed of the criteria for obtaining a bonus and the rationale behind the decision-making process.
How to evaluate ‘softer’ contributions
There is a clear disconnect between using financial criteria as the sole measure of success and the values-based mission statements of many law firms. While only a third of firms have explored non-financial bonus metrics such as collaboration, DEI, ESG or innovation, in schemes where alternative contributions are included they tend to be supporting measures rather than the main drivers for payout.
Pro bono work is something of an outlier in this equation, as a measurable contribution that enhances firm culture and its links with the wider community. The UK Collaborative Plan for Pro Bono 2023-24 reports that 84% of firms count pro bono work towards bonuses.
Living your values
With bonus schemes under the spotlight, it is becoming clear to firms of all shapes and sizes that in many cases, legacy models are no longer delivering in line with the firm’s stated values. Compensation trends, which have led the market in the past, are just one consideration in bonus design. Instead, a bonus scheme should be carefully calibrated to align with the overarching business strategy, communicated to people at all levels in a clear and transparent way, and aimed to attract and retain the best talent.
Katharine Freeland is a freelance journalist
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