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This article, like many others, was first published exclusively for long-term supporters, 1 hour before everyone else got to read it.

Nishith Desai revises fresher pay to Rs 17.4 lakh (incl fixed bonus), cuts bonus retention period • Market salaries stagnant for 5 years now

NDA ramps up base pay and shortens bonus retention
NDA ramps up base pay and shortens bonus retention

Nishith Desai Associates (NDA) has revised its base pay for freshers to Rs 17.4 lakh, including a guaranteed annual bonus of Rs 1.2 lakh, from the previous total level of around Rs 15 lakh, which had last been revised around four years ago.

In a major change, the time period that the guaranteed bonus is paid out to freshers has been reduced from three years previously to only 12 to 18 months now.

NDA’s financial year runs from 1 January until 31 December, unlike most other firms.

Effectively, this means that with effect from January-end 2021, NDA freshers will get a base salary of Rs 16.2 lakh annually (working out to Rs 1.35 lakh per month).

Newly-joined freshers in autumn 2020 would only become eligible to receive their bonus after a probation period of six months with the firm, which means that they would not immediately receive the first fixed Rs 1.2 lakh bonus payment in January. However, by January 2022, those 2020 freshers would receive the aggregate of two years’ fixed bonus, coming to Rs 2.4 lakh.

NDA is also unusual as paying its fee-earners a salary. The model that most other Indian law firm follow is that fee-earners are independent retainers to the firm on paper, which might allow them to set off more of their taxes, though de facto they are treated as employees.

NDA also does not rely on direct campus interviews or recruitments much, and instead its freshers come primarily via post-internship job offers and pre-placement offers (PPOs).

The firm had welcomed four freshers in its 2020 batch (on time without Covid-19 delays, said NDA leader Gowree Gokhale, due to NDA having already had strong technology and virtual working systems in place, even before the pandemic).

In 2019, the firm had hired three freshers.

Across the board in 2020, NDA had hired 14 fee-earners across all levels, confirmed a spokesperson.

Senior PQEs revamped

Together with the fresher increase in pay, NDA has also increased the remuneration for fee-earners at more senior levels up to around five years of post-qualification experience (PQE), roughly in line with the 16% bump at fresher level.

Also unlike most other Indian firms, there is less base pay discrimination within a PQE level and the majority of variation at a level would come via the variable bonus structure after three years of PQE (which is also the way most global law firms operate with a lockstep system of pay bands for fee-earners for the first few years).

In a press release, the firm said that in 2019, bonuses had “averaged 56% and at individual level went as high as 98%“, though that could vary every year, with bonus compensation determined by the firm’s “PAL system (performance, attitude and loyalty)“.

How bonuses are PAL'd

Explaining the PAL system, NDA leader Gowree Gokhale who heads up the IP, technology, media and telecom (TMT) law practice, said that “performance” evaluation was partly objective, driven by data such as the overall time worked by a fee-earner, which includes also non-client work. “As you know, in our firm, we give a lot of importance in education, learning and training others, and research output - we do a lot of research writing papers,” she said. “All these elements are taken into account.” In addition, subjective criteria such as work quality and expertise were also taken account.

At a senior level, performance also included “client acquisition”, “retention”, training and “thought leadership initiatives”.

The “attitude” metric included interpersonal skills and ability, assessed via a “very detailed feedback form” in writing and “extensive talks” by the compensation committee with the firm’s members, according to Gokhale, such as including “mentors telling us about their juniors”.

(The compensation committee of five is elected every year by the firm’s members, which includes everyone who will be evaluated by the committee.)

NDA also had a so-called 360 degree assessment process, but this was actually used more for formulating a “personal development plan” for a fee-earner than directly factoring into their compensation, though it might also be one of the many “inputs” at the back of the committee’s mind in the process but was never the “determining criteria”, she explained.

The 360 degree process also included input from support staff after the so-called “hygiene” factors, such as timely recording of time sheets, billing and administration of the knowledge and document management system.

The final factor, “loyalty”, was beyond just the PQE level and length of service in the firm, including whether a fee-earner was referring candidates to be hired by the firm. “We don’t go for campus recruitment or don’t really do poaching,” said Gokhale. “Referrals are very important for our firm.”

Wider market frozen for years

Founding and managing partner Nishith Desai commented in a press release: “The firm has always differentiated itself by its unique philosophy and culture, which leans towards a holistic approach to rewarding talent. Our total rewards go far beyond the highest financial compensation and extends to intellectual, emotional and loyalty quotients with tons of fun.

“This is also part of our vision.”

Of course, the market today is not the same as it once was: NDA itself, in fact, had briefly frozen salary bands in June 2020, after unfreezing those only two months later.

However, the new fresher pay bands put NDA at the top - or potentially beyond the top - of a market where fee-earner salaries have not been significantly hiked or adjusted at most firms for several years now, since the last salary wars in 2015.

Back then, Shardul Amarchand Mangaldas (SAM) had announced a revolutionary base pay without any bonus component of Rs 15 to Rs 16 lakh per year (though in some cases the firm strangely ended up paying freshers less than promised, as we had reported in 2017).

SAM had followed Khaitan & Co hiking its base pay to Rs 14.4 lakh (excluding up to Rs 1.8 lakh of bonus).

Trilegal had pushed up to Rs 13 lakh plus up to Rs 2.2 lakh of bonuses, while Amarchand Mangaldas Mumbai (as it was back in April 2015, was on a base of Rs 12 lakh and a maximum bonus of Rs 3 lakh).

For batches over five years, the compensation review shall be undertaken in the coming weeks, in Phase 2. The Compensation Committee’s mandate includes determining bonus payouts for 2020 and salary revision for 2021, by the first quarter of 2021. Every year the Compensation Committee .

Typically, the firm pays higher bonuses. For the year 2019 bonuses for professionals averaged 56 % and at individual level went as high as 98 %. The compensation is determined based on PAL system (performance, attitude and loyalty).

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