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Nishith Desai revenues stagnate, prompts firm to freeze salaries at PQE level, delays bonuses (in bid to hopefully increase bonuses)

Message to fee-earners: Buck up in the next 7 months, “arrest the downward trend”, bring in more business
NDA salaries, as of last week
NDA salaries, as of last week

Nishith Desai Associates (NDA) had circulated an internal email announcing a salary freeze for mid-level associates and above, due to the firm having experienced “stagnancy in the revenue growth for 2019”.

This effectively means that those beyond around three years of post-qualification experience (PQE), would not be receiving the customary pay-hike in accordance with their increase in PQE.

Furthermore, under a new bonus structure, bonuses would only be payable up to 12 months after the close of a financial year.

NDA operates a 1 January - 31 December financial year, and the majority of bonuses due from the 2018 calendar / financial year would have normally been expected to be paid to NDA lawyers by October 2019, under the previous policy, in-part subject to recovery of billings.

However, under the new policy announced in the email, these bonus payments would now arrive even later and be paid in “four equal monthly instalments” from 1 October 2019, meaning that the full 2018 bonus would effectively only be received by lawyers on 1 January 2020.

Bonuses would only be paid on each date if lawyers were “not serving notice period” on that date, according to the email.

The email was used as a call to action for lawyers, stating: “In 2019 we are left with 7 months to improve the revenue. We need to work extremely hard, smart and in a disciplined way. We have to arrest the downward trend. Bringing more business to the firm has become imperative.”

The email also noted that 20% of salary would be linked to “critical processes” in order to “weed out our inefficiencies and discounts” - presumably this is referring to chasing up bills in a timely manner and not writing off fees unnecessarily.

Last year, Shardul Amarchand Mangaldas attracted criticism from fee-earners after rolling out a policy to claw back three months of salary in if leaving the firm for a rival. The firm rolled back the policy several days after we had reported it.

Firm would prefer assuring bumper bonuses

Managing partner Nishith Desai commented when contacted: “Even though we have frozen salaries, people are also assured of the same bumper bonus next year. Instead of giving 10-20% salary increase we would prefer to assure bonuses of over 60% and going upto 113% and even more.”

While we have not been able to authoritatively confirm the size of bonuses at NDA, we understand that especially at the senior level, the firm does pay bonuses above typical market rates.

Desai added: “As Venture Capitalists do, we like people who are risk takers. We invest almost 40% time and at times about 50% of the profit in in research, academic and innovation. We give up huge amount of billable time in daily continuing education. This year we are taking our entire firm to Estonia to study technology driven country. We just don’t pay people, we invest in them too.

“We have moved to dynamic compensation model which is open, transparent, fair and equitable. At the start of the year everyone has clear idea how would they be judged at the end of the year. Our sophisticated software informs everyone every month the data on how they are performing and guided by leaders and mentors so that they do better and better every month.

“Sometimes revenues slow down because in the first part of the year we may have spent disproportionately more time on research , training or even social work on pro bono basis. We are not purely money minded law firm. We may make up in the coming 7 months but in the meanwhile every one has to be patient. We swim together.

“We still believe, we are in the profession of law and not in the business of law. That’s our philosophy and that’s our culture.”

The internal email

The email circulated internally to NDA fee-earners read:

The bonus payment for 2018 will be paid in four equal monthly instalments starting from October 1, 2019. This amount shall be payable subject to your continued employment with the firm and you not serving notice period on the date the amount is paid.

We have received stagnancy in the revenue growth for 2019. therefore to have a good bonus pool at the end of the year and to reward firm members based on performance we are not increasing the salary of firm members for the current year, we believe this will result in higher bonus for better performance in the coming year.

In 2019 we are left with 7 months to improve the revenue. We need to work extremely hard, smart and in a disciplined way. We have to arrest the downward trend. Bringing more business to the firm has become imperative. It is our moto (sic) to deliver highest quality work in shortest possible time and that’s the best way to capture premium billing.

Certain processes are critical to the existence of the firm. They must be followed to weed out our inefficiencies and discounts. Even after repeated requests, members have not been following these critical processes resulting in serious loss of revenue and increased risk on the firm. Hence, going forward 20% of the current salary shall be linked to some of these compliances on a monthly basis. Others will be factored into half yearly or annual performance.

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