Start Your FREE Membership NOW
 Discover Proven Ways to Be a Better Law Office Manager
 Get Our Daily eNewsletter, Law Office Manager Bulletin,
    and MUCH MORE
 Absolutely NO Risk or Obligation on Your Part -- It's FREE!

Upgrade to Premium Membership NOW for Just $90!
Get 3 Months of Full Premium Membership Access
Includes Our Monthly Newsletter, Office Toolbox, Policy Center, and Archives

Common partner compensation systems

By Brenda A. Barnes and Camille Stell

Partner compensation is probably one of the most sensitive aspects of a law firm’s practice management. Whether you are adopting a new system or modifying the current one, there must be an extraordinary amount of thought, care, and study.

Systems are either non-performance-based systems or performance-based systems. Here are the typical systems:

Non-Performance-Based Systems:

  • Ownership percentage: Income is allocated on relative ownership percentage.
  • Pay equal: All partners are paid equally, or nearly so.
  • Seniority or lock-step: Partners are paid based on years as a partner. This method is all but obsolete, however, some firms still have a baseline built into their systems for more senior partners.

Performance-Based Systems:

  • One person decides: Typically the managing partner or other designated key partner (often referred to as the designated pie slicer).
  • Compensation committee: Instead of one person allocating income alone, a highly credible, small number of partners is elected and/or appointed to allocate income.
  • Paper and Pencil: The partners complete a ballot in which they allocate income to all partners. Each partner’s ballot is averaged and the result is the income allocation.
  • Pure formula: An algebraic formula devised, based on business origination, book of business, billable hours, realization, and other factors.
  • Shared overhead: Also referred to as profit center accounting. Each partner is allocated a share of the firm expenses, individual expenses are allocated to the partner directly.

Whatever method the firm decides to use, the most popular systems have a base compensation and a year-end bonus. The base compensation can be set at the beginning of the year based on prior year performance or the base can be determined by current year productivity. When a firm utilizes the latter, a partner will take draws against the projected compensation with a semi-annual or year-end true-up.

Brenda A. Barnes and Camille Stell are co-authors of RESPECT — An Insight to Attorney Compensation Plans ( They will present a webinar on compensation and bonuses this Thursday, Feb. 23. It’s free for members of Law Office Manager, and there is still time to register here.









Try Premium Membership