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Banking is not the only industry where people receive bonuses.
Bonuses are also offered in other professions. And in other professions there is no obligation to defer bonuses over multiple years, to claw them back, to base them on risk adjusted measures of performance, or to subject them to punitive forms of taxation.
Then again, bonuses in other industries tend to be a lot lower.
Bonuses in law firms
Lawyers’ bonus arrangements are interesting.
Andrew Roberts at legal search firm SS Legal, says the average solicitor at a magic circle firm can expect a small bonus equivalent to just 10-15% of his/her salary. Just a few years ago, 40% was the norm.
The situation is more complex for equity partners at law firms. In order to become an equity partner, senior lawyers have to stump up a significant amount of their own cash (eg. 250k). Having done so, they are able to share in the profits of the firm.
For example, a firm that makes a profit of 10m and has 10 equity partners will pay each partner 1m for the previous year. Roberts says a small proportion of this (eg. 8k a month) will be paid in a monthly ‘drawdown’; the remaining 904k will probably be paid on a quarterly basis over the following year.
In the event that the law firm makes a loss or needs more equity, equity partners may be obliged to pay money back, or to stump up additional cash. This happened last year at Clifford Chance: equity partners were asked to invest a further 150k.
If equity partners fail, or are unable to respond to a cash call, the law firm is able to start bankruptcy proceedings against them. This also happened last year, in the case of Stephen York.
Bonuses in strategy consulting firms
Strategy consultants don’t get big bonuses either (as a proportion of salary). According to headhunters in the sector, McKinsey will typically pay a 70k base salary to an ‘associate’ (someone with an MBA and five years’ pre-business school experience), plus a 20-25% bonus.
A ‘mid-range’ partner could allegedly expect a salary of 400k, plus a 400k bonus. A high proportion of bonuses is apparently unrestricted cash.
Like partners in law firms, senior partners at strategy consulting firms are usually equity partners with their own capital on the line.
Bonuses in the oil and gas sector
Paul Thomas, a headhunter at oil and gas search firm SPS International, says directors working in oil and gas firms typically receive bonuses equivalent to 100-300% of their salaries. However, engineers on 50-60k, or project managers on 100k will be more likely to receive bonuses equivalent to 20% of their salaries.
“Bonuses are based on a number of things,” says Thomas. “They include health and safety and company profits.
“I have never been able to work out how the health and safety element is calculated,” he adds.
Bonuses in the public sector
Public sector employees also receive bonuses, but they are not large.
The Telegraph reported in January that the average senior civil servant in the Cabinet Office received a bonus of 9.3k last year.
Perversely, whilst preaching bonus restrictions to banks, the FSA is freezing salaries and increasing bonuses for its own staff. However, its bonuses are not large: in 2009 the average was 8k.
Pretty tame, especially the McKinsey figures – I thought they were the GS of the management consultancy world?
McKinsey figures are higher. Review your sources.
Nick – have you ever worked for a top tier consulting firm. I mean actually sat there and done a full time post MBA role? I have. The numbers quoted are correct. There are a few extra perks on top of the quoted figures such as pension contributions and car allowances (another ~10k per year). So total annual comp for a year 1-2 associate is 90k-100k, there would also be an additional 15-20k sign on bonus.
@Mgmt Consultant, the pension and car allowance together is higher than 10k for McK at least. – don’t know about others. The pension is calculated on total comp. (sal+bon).
Come on guys do the math – I know its easier for me as I have worked there, but seriously have a think and grab a calculator before typing………..[70k basic * 1.25 (bonus) *1.07 (pension)] +5k (car) = 99k – last time I checked that was between 90k and 100k. Also, to get a 25% bonus you will need to be at the top end of the associate pool, so 9 times out of 10 will likely be a 2nd year. Yes there will be an amount of salary progression between years 1 and 2, but it isn’t going to knock the ball out of the park so on average 90k – 100k is a good number to work with – this is my gift to you.
Mgmt Consultant – your gift might be worth something if your base numbers were actually correct! 70k basic is definitely under for someone with 5-7 years experience inc MBA for McK – I am talking about those starting this month.
Nonetheless, for FXTrader etc, it is worth pointing out that being the ‘GS’ of consulting world actually means paying less (esp at the junior levels). Eg new undergrad base at McK is c. 35k with no sign on, but other strategy houses – 1 in particular – will pay 44k with up to 10k sign on (plus end of year). i.e. the brand means they can pay less.
To get back to the point of this article, the bonus %’s for strategy consultants are about right, even if the base figures are of. I.e. significantly less than banking.
I second Strat Consult. The value is in the brand + the network that McK offers you – better than any other employer, including GS. The exit options are much varied as well.
So a second year analyst at a bank (age: 22-23) is better paid then a MBA graduate with 4-6 yrs experience (age 26-29)?
That is rough.
Either way, 100k +/- is not bad money for going into people’s businesses and completely knackering them
@FXTrader: I’m assuming you are comparing with market side comps. The benchmark should be M&A. There the comps are very similar.The target audience is same for M&A and Strat. Consult. , traders are not target audience for consulting and vice versa.