Hourly Production Bonus Plan

You can earn substantial additional income through increased production.
Note: This Policy and the Bonus Plan described herein substantially increase the bonus amounts payable under the former version of this Policy. This Policy is effective commencing November 1, 2019, and does not apply retroactively.

The Hourly Production Bonus Plan (often simply termed the “Production Bonus”) pertains only to salaried attorneys and LSS staff. Non-salaried attorneys are paid on a separate structure.

In addition to an attorney’s base salary, there are three kinds of bonuses paid by the Firm:

  1. Discretionary Bonus: Sometimes referred to as the “arbitrary and capricious” bonus, this category of supplemental compensation may be paid when Firm management deems it desirable to do so; no standards are applied and no quantum of fairness is promised. This bonus is totally subjective.
  2. Marketing Bonus: This supplemental compensation is paid on the basis of client generation, subject to a written Policy entitled Marketing Incentive Bonus Plan, which details the potential for an attorney to significantly augment his or her base salary with percentage interests in income derived from new sources of business which the attorney initiated and materially participated in securing for the Firm.
  3. Production Bonus: This supplemental compensation is paid on the basis of hourly billing, at the rates shown below, and is covered by definitions, requirements and caveats covered in this Policy.

The Production Bonus Plan is intended to provide financial rewards to lawyers who significantly exceed the Firm’s minimum billing requirements, as stated in the Policy entitled “Hourly Billing Requirements,” which specifies that for salaried attorneys working on an hourly basis, the firm’s monthly minimum billing requirement is 150 hours (which equates to 1800 billable hours per year).

Principal Terms & Conditions

Definition of “billable hour.”  Eligibility for Production Bonus payments is based upon collectible billable hours. While the term “billable hour” is given a broader definition in the Policy entitled “Hourly Billing Requirements, the term “billable hours” as used in this Policy is defined as time billed on client invoices and paid by the client. 

Billable hours do not include time that is designated as “no charge” or time entered for contingency fee cases. (Note: exceptional performance on contingency fee cases very frequently result in discretionary bonuses, depending upon the amount of fees generated by the case.)

Marketing, administrative, educational and other categories of time should be billed specifically as such. No credit under this program will be given for marketing, administrative, or other work that is not immediately financially productive; however, valuable services of attorneys and support staff in these categories may be rewarded under the Marketing Bonus, the Discretionary Bonus, or other incentives granted by the Firm.

Bonus eligibility for valuable participation in financially productive contingency cases will be determined subjectively by the firm in light of efficiency and effectiveness of work performed and economic conditions prevailing upon receipt of funds. Hours spent on contingency fee cases should be recorded with accuracy.

Attorneys: Monthly Billable Hours to Qualify

To be eligible for the Bonus Program, which is available to all salaried attorneys, average monthly billing must meet or exceed the minimum billing requirement of 150 hours per month. Each month has on average 4.35 weeks, so this requirement requires, on average, 36 billable hours per week. Hours billed in excess of 150 hours per month are bonused by the hour on an increasing scale. The examples shown in the tables below demonstrate how these calculations are made.

All billable time must meet Firm standards for reasonableness. The Firm expressly reserves the right to reduce any time which we deem excessive, abusive, or unjustified.

Bonus rates:

Tier 1. The Production Bonus begins at 155 hours billed and collected per month. The hourly bonus for the month in the first tier is $25 per “bonus hour” (which is defined as hours billed above 155 for the month). Getting into Tier-1 requires an average of only 36 hours of total billing per week! 

Tier 2. The hourly bonus for the month in the second tier is $45 per “bonus hour” (which is defined as hours billed above 155 for the month). Getting into tier-2 requires an average of only 40 hours of total billing per week! This means that when Tier-2 is reached, the bonus for both your Tier-1 and Tier-2 hours is paid at the Tier-2 rate of $45 per bonus hour billed and collected.

Tier 3. The hourly bonus for the month in the second tier is $55 per “bonus hour” (which is defined as hours billed above 155 for the month). Getting into tier-3 requires an average of only about 43 hours of total billing per week! This means that when Tier-3 is reached, the bonus for all of your bonus hours is paid at the Tier-3 rate of $55 per bonus hour billed and collected.

In the event an hourly client fails to pay a bill or it becomes necessary to write-off a bill or portion of a bill, the Firm may, at its discretion, agree to pay the bonus nevertheless. The amount of the bonus payment increases as hours increase from level to level, as set forth below:

Tier Monthly billable hours Bonus (per additional hour)
1 155-170 $25
2 171-185 $45
3 186+ $55
Weekly Monthly Billing Monthly Bonus Annual Bonus (if sustained)
40 hrs

(40 hrs/wk) X (4.35weeks)=

174 hrs

(19 bonus hrs) X ($45)=

$855

$10,260
50 hrs

(50 hrs/wk) X (4.35 weeks)=

217.5 hrs

(62.5 bonus hrs) X ($55)=

$3,437.50

$41,250
55 hrs

(55 hrs/wk) X (4.35 weeks)=

239.25 hrs

(84.25 bonus hrs) X ($55)=

$4,633.75

$55,605

Support Staff

To be eligible for the Bonus Program, which is available to all salaried attorneys, average monthly billing must meet or exceed the minimum billing requirement of 150 hours per month. Each month has on average 4.35 weeks, so this requirement requires, on average, 36 billable hours per week. Hours billed in excess of 150 hours per month are bonused by the hour on an increasing scale. The examples shown in the tables below demonstrate how these calculations are made.

All billable time must meet Firm standards for reasonableness. The Firm expressly reserves the right to reduce any time which we deem excessive, abusive, or unjustified.

Bonus rates:

The Production Bonus for LSS staff begins at 15 hours billed and collected per month. A flat bonus amount is added each month according to the table below, regardless of whether the Firm is paid.

Tier Monthly billable hours Bonus (per additional hour)
1 15-20.9 $150
2 21-25.9 $200
3 26-30.9 $300
4 31+ $450

The Production Bonus for LSS staff begins at 15 hours billed per month, on a tiered basis according to the table at left. A flat bonus amount is added each month according to the table below, regardless of whether the Firm is paid; however, the bonus is not considered vested, earned and determinable for LSS staff until the end of the month following the month during which the bonus is earned.

The achievement of these billing levels will entitle eligible attorneys to bonuses on the basis of the hours billed above 155 hours per month, subject to the stipulations and caveats set forth below.

Additional Criteria

Taxable income.  The bonus amounts listed above are taxable income and will be treated as added salary. The actual amount received by the attorney will be adjusted by all applicable taxes and withholding that applies to salary income.

Eligibility of billing entries.  Billable hours, to qualify, must be earned and meet the criteria contained within all other Firm Policy and Procedures.

Case planning checklists. Attorneys will find that careful case planning and implementation of the Firm’s Case Planning Phase Checklists, together with continuous and faithful communications with our clients will make it much easier to you to reach your billing goals.

Termination. Any salaried attorney or LSS who is terminated or resigns before the end of a given month will not receive pro-rated bonus amounts; however, if they had entered sufficient and qualifying billable hours to receive a bonus for that month up to the time of their departure, they will receive a bonus for their final month according to this Plan once that amount is vested and determinable under this Policy. For attorneys, bonus amounts are not payable until the Firm receives payment from the client, as bonus eligibility is not vested, due and owing until after the Firm receives payment from the client. Bonus amounts are not considered salary for purposes of the Colorado Wage Act, Colo.Rev.Stat. § 8-4-101 et seq., which provides at § 8-4-101(14)(a), that “No amount is considered to be wages or compensation until such amount is earned, vested, and determinable, at which time such amount shall be payable to the employee pursuant to this article.” The bonus amount owed under this Policy is not earned, vested and determinable until the client has paid the bill for the month in question.

Cautionary Remarks

The plan is designed to operate on the basis of mutual good faith by the Firm and its attorneys.  We pay you for the value and quality which you produce for the firm. Supplemental financial compensation (like all pay) is earned and is not an entitlement. On the other hand, we have no incentive to see your hours reduced arbitrarily; the very reason we have implemented this program is to cause your billable hours to go up rather than down. The caveats set forth in this Policy Memo are designed to prevent misunderstandings and to head off the concerns relating to “billing games” (defined below), which can lead to trouble and correction of billing entries. The Firm has had a Production Bonus Plan in effect since 2001, and while it has been adjusted to adapt to experience, we have found that the plan works well when attorneys behave ethically.

“Billing games” prohibited.

Lawyers who try to “game” this system will be disqualified from receiving any Production Bonus. “Billing games” are billing practices which reflect or imply a lack of good faith on the part of the billing attorney. The decision regarding whether billing entries or practices are appropriate will be made according to the Firm’s subjective judgment and/or the judgment of our clients. If a client complains about a billing entry, even if the Firm raised no objection before the bill was transmitted to the client, then the time may be subtracted from the totals of the billing attorney as a consequence of a decision to reduce the fees charged. One of the requirements for billable time to apply toward a bonus under the plan is that the client is not dissatisfied with the bill, which is one of the obligations of every attorney in the Firm. The term “billing games” includes any and all practices or methods which appear to qualify for a bonus without commensurate benefit to the firm or its clients.

Below are two examples of good and bad billing practices:

Example of Good Billing: This chart depicts the billing of a lawyer who truly earned the Production Bonus several times in one year. While generally meeting or exceeding the Firm's minimum standards, the lawyer was able to substantially augment her income through hard work. We love writing bonus checks to this kind of lawyer, and often find reasons to add discretionary bonuses to reward overall performance.

Example of Billing Game: This chart depicts the billing of a lawyer who, in the early days of our Production Bonus Plan, reached bonus 5 times even though that lawyer's annual average billing placed that lawyer well below the firm's minimum monthly requirements. That lawyer did not bill additional time to earn a bonus; he simply re-arranged his hours to reach bonus every other month. When a lawyer reaches bonus levels occasionally, but the rest of the time fails to meet the Firm's minimum monthly requirements, the lawyer is considered to be playing "billing games."

The differences between these two examples is merely a matter of the degree to which the attorney’s average production over time genuinely exceeds the threshold for bonus eligibility. An attorney using the “seesaw” method (sometimes also called the “peaks and valleys bonus gimmic” do not really qualify for the bonus because they are, over time, not genuinely exceeding the Firm’s required levels of production. There is no set formula applied to the evaluation of whether an attorney is playing this “billing game” and for that reason the Firm reserves the right to apply its subjective judgment to the issue. Generally, when a problem is perceived, that attorney will be given some feedback to gain clarification of the concern, so that it may be addressed by the attorney.

The client’s perception of value.

Remember: if a client received value for time billed, but does not know that this is so, then the value does not exist in the mind of the person paying our fees. Make sure that each and every one of our clients knows, before receiving a bill, why the billed amount is worth the fee. This is a natural by-product of frequent high-quality communication with clients.

Conclusion

IF YOU—

  • do extra work;
  • become more efficient;
  • capture all of your billable time; and
  • constantly improve the quality of your legal services,

THEN YOU WILL—

  • make more money;
  • improve your standing in the firm; and
  • improve your standing in the legal community.

It will be more than worth it in the long run!