New pay structures—what’s possible for law firms?

New pay structures—what’s possible for law firms?

The traditional pay structure in law firms can be inflexible, but what alternatives are available and would they be practical for law firms?

The legal profession has never been keen on change, and the traditional employee remuneration model has remained much the same as it has for decades—largely based on the hourly rates, billable income and lockstep pay rise model. As Tony Williams, principal at Jomati Consultants, says: ‘It’s always been about salary and bonuses: some linked to individual performance, some on firm performance as a whole.’

The problem with the traditional pay structure is its inherent inflexibility. However, as Janvi Patel, co-founder of Halebury, says, there are ways to play around the edges, for instance, rewarding non-fee earning activity, but in essence it remains the standard pay/reward ratio.

New business models

But with new business models comes an ideal opportunity for change. Patel comments: ‘Alternative legal services providers (or “NewLaw” firms) are proof that it is possible to shake up the pay structure in law firms at all ends of the market—from senior fee-earners at firms such as Halebury, to those doing more volume or routine work via legal process outsourcing models. These new pay structures often involve rethinking the traditional pricing model, looking at what motivates team members as well as what grows the business and how you incentivise that.’

What seems to work, she observes, especially with those companies which fall into the emerging sector of the sharing economy, is streamlining the pricing and reward model. She explains: ‘You essentially receive a percentage of what you generate and bring to the table. This seems to incentivise and reward those who work hard but it also helps play to an individual’s strength, for example, those who are more actively engaged in business development and marketing.’

Patel cites anecdotal feedback the firm has come across while recruiting for Halebury which suggests more and more lawyers are looking for transparency on what they have to do to receive the salary or profit level they want to achieve—but they also want remuneration targets that are realistic to achieve.

Legal application?

Could this work in a law firm? She believes that changing pay structures within a traditional law firm, especially within BigLaw, would be a challenge give

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