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Characteristics of a modern compensation plan for lawyers

By Brenda A. Barnes and Camille Stell

A successful compensation plan should reflect shared goals and values. A successful plan also requires trust among the members of the firm. A winning compensation plan aligns the values of the law firm with relevant, up-to-date market data.

Here are additional components of a modern compensation plan.

Evergreen

Compensation plans must be constantly evolving. What worked 10 years ago is likely not working well today and what works today may not work five years from now. The legal system has faced as much change in the past 10 years as in prior decades. Everything about the system has changed, from the amount of law school debt that the majority of young lawyers have, to the changing face of legal competition. Continually reviewing and refining your compensation plan, benefits, and other incentives will help you manage the change rather than being left behind while firms around you evolve.

Transparency

Pay transparency does not mean revealing what each employee is making. Rather, it is about establishing and communicating salary practices that allow employees to see their salary in the context of the market. The goal of transparency around pay in the law firm is to build employee confidence in the fairness of the process.

With a talent war-waging and open salary discussions increasing, law firms should recognize transparency and pay equity as part of a progressive firm culture. Transparency will allow firms to develop strategic and data-driven compensation plans that are proactive and fair to firm members. Also, most human resource consulting firms report through their articles, surveys, and white papers that pay transparency has been shown to have a positive effect on job satisfaction, employee engagement, and productivity.

Transparency is a value of Next Generation lawyers and one that is foreign to lawyers in traditional law firms outside the partner ranks. This lack of transparency will be a major point of conflict between partners and associates now and in the future.

Pay equity

Pay equity is often conflated with pay transparency, but they are different. Pay equity is achieved by measuring and correcting pay gaps through data collection and analytics. It is also helpful to identify root causes of pay inequity to prevent the inequity in the first place.

According to the 2020 Report, Diversity in U.S. Law Firms, the legal profession has a problem with pay equity. While the numbers of men and women who attend law school have not been separated by more than 10% in the past 34 years, women make up only 20% of equity partners and women of color comprise less than 2% of equity partners.

Data from five biennial salary surveys by the legal recruiting firm Major, Lindsey & Africa showed stark differences in average pay between male and female partners and that the pay gap for partners has widened since the inception of the survey in 2010.

Brenda A. Barnes and Camille Stell are co-authors of RESPECT — An Insight to Attorney Compensation Plans (lawofficemanagementbooks.com) Watch for registration details on a webinar to be presented by Brenda Feb. 23 for members of Law Office Manager.


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