From: The Executive Committee
Sent: Friday, December 15, 2006 11:50 AM
To: ASSOCIATES - NY; ASSOCIATES - DC
Cc: PARTNERS - NY; PARTNERS - DC
Subject: 2006 Year-End Bonus

The Executive Committee is pleased to announce that the year-end bonuses for NY & DC associates in good standing will be as follows:

CLASS BONUS
2006 $30,000 (pro-rated)
2005 $35,000
2004 $40,000
2003 $45,000
2002 $50,000
2001 $55,000
2000 $60,000
1999 $65,000
1998 $65,000

Bonuses will be paid on Friday, December 22nd. As always, associates who have been with the firm for only part of the year or who are working part-time will receive a pro-rated bonus.
On behalf of all of our partners, I would like to take this opportunity to thank you for your continued efforts on behalf of the firm and our clients. We wish you and your families a happy, healthy and peaceful 2007.

I really don't understand why bonuses have all but replaced any interesting topics of conversation these past weeks. (No snark, just genuine wonder.) There are hardly any surprises, and the memos are not exactly models of hilarity. I think it would be more interesting if somebody had an anecdote regarding any performance-based reduction in said bonus (e.g. Partner told me I wasn't getting a bonus because I billed 1200 hours this past year and I sent a typo-riddled S-4 to the printer).

Interesting that both of these firms are paying their bonuses in December rather than January (which I recall most firms that have announced so far as doing). Obviously it all comes out in the wash at the end of the day (er, tax year), but in terms of cash-in-hand, that's better for associates, right?

Why does everyone in law firm management/administration always capitalize the "Firm"? I've always thought that's a little weird.

Dan, wouldn't the deferral effects of the tax (~1/3 * 12 months inflation) be more than that of getting the money maybe 1 month sooner? Paying in Jan defers the tax until April 2008...

Hey lawstudent - even if the income isn't "taxed" until April 2008, taxes will still be withheld (and at a hefty amount, too, because it will be withheld at the maximum rate). If the firm pays in December, you can get your refund all the quicker on those excess taxes withheld in the next April (4 months later, or earlier if you file quickly). However, if you get paid in January, you won't get refunded on the excess taxes paid until the next April (15 months later). That's a pretty hefty no-interest loan to the government.

I was thinking about two things:

1) In terms of withholding, I believe the new provision is that instead of withholding taxes as if that was your regular paycheck (like they used to), that they now withhold bonus compensation at a flat 15% rate.

2) If they pay the bonus in December, they won't withhold SS taxes, because you're already over the threshold. If they pay it in January, SS taxes get withheld.

There's a thread somewhere on Greedy where they've calculated what the cash difference is between getting your bonus in Dec. vs. Jan.

Davis Polk:

From: Ferrell, Kathleen L. On Behalf Of Management Committee
Sent: Friday, December 15, 2006 3:34 PM
To: Management Committee
Subject: 2006 Associate Bonuses

We are pleased to announce that associates in good standing will receive a bonus payment as outlined below. Bonuses will be paid on December 29, 2006 in the same manner as the regular December monthly paycheck, and will be subject to proration for those who arrived after January 1, 2006 and those on part-time schedules or other special arrangements.

We thank you for your efforts over the past year, and wish you and your family a wonderful holiday season.

Class of 2006: $30,000 (prorated)
Class of 2005: $35,000
Class of 2004: $40,000
Class of 2003: $45,000
Class of 2002: $50,000
Class of 2001: $55,000
Class of 2000: $60,000
Class of 1999 and senior: $65,000

The Management Committee

I think its a flat 25% rate, not 15%. True, re: SS taxes. I think its better to just get it in December as opposed to January