Leading_UK_Firms_Partnership_ModelTop commercial law firms are increasingly turning to performance-based pay packages as the
Following a comprehensive survey of City law firms’ remuneration arrangements for partners, Legal Week can reveal in-depth details of partner pay at the
The survey, which also examines a number of firms outside the top 20, shows that while most firms maintain a form of lockstep, the majority are driving towards a more performance-led remuneration scheme.
Only national firms Eversheds and Wragge & Co and City outfits Simmons & Simmons and Olswang operate a largely merit-based system.
However, the results underline a shift in recent years away from pure lockstep — under which partners are paid solely on the basis of seniority — to a managed system, which allows partners to be moved up and down the equity ‘ladder’ depending on performance.
Of those firms still operating a lockstep (see table), all apart from Freshfields Bruckhaus Deringer, Slaughter and May and Herbert Smith currently have a managed system.
City giant Lovells retains the ability to demote partners by an unlimited amount, while CMS Cameron McKenna can demote under-performing partners by 30% of their existing points.
Denton Wilde Sapte can also move partners up by 20 points on a scale that runs to a total of 90 points. According to the survey, Ashurst and Travers Smith have no rules in place for the management of their lockstep while Clifford Chance (CC), Linklaters and Norton Rose were among
several that declined to answer the question.
Although the majority of firms still claim that partner promotion up the ladder usually takes place each year, the lion’s share — including Lovells and CMS Cameron McKenna — concede that promotion is now subject to annual appraisal.
Additionally, Ashurst, Norton Rose, Berwin Leighton Paisner (BLP) and Hammonds have ‘gateways’ within their locksteps, at which points financial performance becomes a deciding factor in whether a partner passes to the next level.
Dentons chief executive Howard Morris told Legal Week: “It used to be the case at City firms that once you made partner you would move up the ladder automatically. Now all City people are tested constantly on their contribution.”
When it comes to remunerating partners in foreign jurisdictions, a significant majority of
CC and Allen & Overy are the only firms to concede that they operate different locksteps in foreign jurisdictions. Linklaters and Freshfields declined to answer.
Similarly, CC is the only firm to concede to awarding high-performing partners a series of ‘super-points’ over and above the formal lockstep.
Many firms are keen on retaining a lockstep while simultaneously rewarding high-achieving partners and seven firms, including BLP and Travers, hive off a proportion of profits for merit-based pay.
Travers managing partner Chris Carroll said: “We are at the pretty unmanaged end of ‘managed’ because we feel the more time partners concentrate on their own performance and the less they spend on looking at the performance of others, the better.”
He added: “We do nonetheless recognise that a pure lockstep can cause its own frictions, which is why we have a small merit pool.”
Notably, pure merit-based firms have a significantly higher ratio between the top and bottom of the remuneration ladder, with Eversheds on a ratio of 3.2:1, Olswang 3.9:1 and Wragges on 4.5:1.
