By Jim Calloway

How much should a lawyer be paid and how does a law firm calculate that? We sometimes get questions about how to determine salary for newly hired associates.  Unfortunately, there is little available data about that in our state. Typically, a lawyer’s compensation is based on an annual salary plus an unspecified end-of-year bonus based on individual performance and law firm financial success. Sometimes the method of calculating the bonus may be less than transparent ̶̶ aka the “black box.”

The Law Firm Ecosystem: Compensation is part 2 of a series written by veteran practice management advisor Erik Mazzone on Attorney@Work. Erik looks at the “black-box” compensation vs. percentage-based, variable compensation plans. These plans will take more time to craft. But there are many advantages. Suppose a partner who has been productive for years has a personal emergency and must temporarily relocate to another state to care for an ailing family member. While they can remote work to handle emergencies, their total billing is likely to decrease. Under the status quo, it might be necessary to convene a partner’s meeting to determine how much to cut the lawyer’s income. This will be complicated as some lawyers will focus on the math and others will focus on how they would like to be treated if they were in a similar situation or their relationship with the individual lawyer. Wouldn’t it be better for all concerned if the existing compensation plan included a formula to handle these situations?

It isn’t easy. But if you read Erik’s advice, you will see that it can be more straightforward than you might think. And as more law firms move projects to fixed fees, it will help to have compensation related to those already built into the plan.

Originally posted in Oklahoma Bar Association’s Courts and More, September 27, 2023.