Employed Lawyer Remuneration...The Right Formula...

Few days go by when I am not asked about the "correct" formula for employed lawyer remuneration.

In varying types of language depending on my mood I point out that I regard such formulas as a nonsense...they always have been for 99.9% of circumstances and always will be...
Even if a formula was a good idea...the formulas used vary enormously so an average or even a band won't help you much...


A formula will help you if you want to re-direct much of what should be your legitimate profit to employees...whether they do a proper day's work and deserve it or not!

I recommend that firms always pay people according to their overall worth to the firm relative to market, and organise to have them doing enough productively at all times that you can pay a bit above market.

To demonstrate my point about formulas...

Lawyer A and Lawyer B are the same years post-admission experience and ostensibly pretty much the same in other key areas...

However Lawyer A may be genuinely able to assist the firm for a small part of the day on average with Marketing and Precedent Development...

Lawyer B works the same hours but is hopeless in those areas despite extensive persistent training, but is very good at supervising less experienced fee-earners...

We have a problem...there are few people needing supervision at the present time...Lawyer B's FirmTime skillset in that area is not presently in demand!

The net effect is that lawyer A puts in an average 8 hours a day less 2 hours on average of Firmtime..including Marketing and Precedent work...6 hours client work...

Lawyer B puts in 8 hours less 1.25 hours a day FirmTime...6.75 hours client work...

All else being equal Lawyer B will bill quite a bit more than Lawyer A in a year...at least $50,000...BUT THAT DOES NOT MAKE LAWYER B WORTH MORE REMUNERATION...

The extra net benefit to the firm of Lawyer A's efforts will make that lawyer worth as much, if not more than Lawyer B, despite the lower billings.

A lawyer who can bring in work is in fact more valuable than a lawyer who mainly does client work...because that lawyer can help keep others in a leverage structure busy...generating better returns...

Yes, there is a small challenge in determining what market worth is...but you'll have so much extra revenue to play with you can afford to be a bit more than usual on the generous side!

On the ground in firms it's hardly ever a problem...as most employees who have weaned themselves off the formula idea have a fairly good idea what they think they're worth. Ironically it's almost always less than what I believe they're worth so it's not hard to get them sorted and happy...until the next round of remuneration reviews!