Remuneration systems for partners of law firms

Remuneration systems for partners of law firms

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Following news that Linklaters partners are due to vote on changes to their lockstep remuneration structure, Peter Scott, principal of Peter Scott Consulting and former managing partner of Eversheds’ London and European offices, examines the potential alternative methods of law firm remuneration.

Can you outline the most usual forms of remuneration for equity partners?

While it is probably true to say that there are as many forms of partner remuneration as there are law firms, in the sense that every firm is different and has different needs and objectives, two basic types of reward models have evolved (and are still evolving):

Lockstep

This is where remuneration is based solely on seniority and where a partner climbs a ‘lockstep’ over a period of years, starting from a low base (perhaps 50% of a full share) until the partner becomes ‘whole’ with an equal full share. The partner then remains on that plateau until retirement. This is often known as ‘traditional’ lockstep and many firms still cling to this form of ‘dividing up the spoils’, despite both internal and external pressures for change.

Modified lockstep arrangements

These involve, to varying degrees, using various elements of partner performance as criteria for both a partner’s advancement up a lockstep and allocation of reward. There is no ‘one size fits all’, many remuneration structures employ elements from traditional lockstep linked to the application of performance management disciplines.

Eat what you kill

I do not regard ‘eat what you kill’ as a true remuneration model or as something desirable for a law firm. It is often used in situations which are not partnerships but merely cost sharing arrangements —the participants share certain overheads but otherwise keep everything they generate as individuals. It is suited to barristers’ chambers and other professions such as dentists’ practices.

What are the pressures on firms that may cause them to review their forms of remuneration? In

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