Even a boring, ho-hum compensation review season is maximum brutality within a law firm. What awaits the next law firm assessment season? It will be anything but routine.
I hesitate to say “it’s different this year”, but honestly, it’s different this year.
The whirlwind of the law firm “pay war” means compensation issues will have an outsized impact. There’s also the call for unprecedented pay transparency, with many companies set to tell the world exactly what their lawyers are doing.
The new business the post-pandemic world and increased emphasis on ESG means that law firms are called upon to demonstrate their commitment to fair compensation, just like their clients, and those who do not commit risk suffer the brunt of high-profile pay equity lawsuits and flee talent.
So why recently released 2021 Bureau of Labor Statistics the data shows a wide gap, with female lawyers earning 26.5% less than male lawyers ? This is something that cannot be explained by role differences alone, as another report by Major, Lindsey & Africa showed that the average earnings of male partners were 44% higher than the average earnings of female partners.
It sounds a lot like a viral joke on TikTok that men choose high-paying careers like lawyer and women choose lower-paying roles like lawyer.
Pay equity leaders may still fall flat
Law firms have the foundation to be leaders in pay equity. Many companies have fixed or semi-locking associate compensation systems. Although they have certain disadvantages, these systems have the advantage of reducing the pay gap. This field-level advantage can affect the roles of partners.
Additionally, law firms have a virtual data lake that would give most companies undertaking pay equity reviews serious data cravings. The class year of associates, partners, and law schools, credible multi-year billable hour records—seemingly objective measures of productivity and profit—and the value of billed and collected time are collected regularly .
Law firms may not consider how good they have it when it comes to having many of the tools needed to explain why lawyers get paid what they get paid. And they know the law.
So why the pay gap in law firms persist?
Gaps in data tracking, subjective factors
As a thought experiment, think about the last time your company published compensation statements showing bonuses and annual raises. Have you been told or assumed that your company’s compensation committee or executive committee has a formula or methodology that allocates and then calibrates compensation fairly and consistently across the company?
While I know this to be true in some law firms, there is a secret about this process in far too many others: many cannot fully or consistently explain, let alone demonstrate with a methodology. and solid analysis, the factors that determine compensation.
In fact, some companies have been accused of being a “black box” of compensation. With so many law firms providing legal advice to their own clients on pay equity, why the disconnect?
Sometimes companies just haven’t tracked the right information. While the data lake can be useful for more stringent metrics such as billable hours, more flexible metrics such as key industry recognitions, cross-departmental or global collaboration, contributions to building a culture corporate or external profile, lean years due to a major case settlement, or a key customer leaving the company – usually also important for compensation, but may not be tracked well.
If it’s important, follow it.
For others, the toughest measures of productivity get soft when put under the microscope. Companies need to assess whether the metrics they build into their compensation systems, such as performance ratings or credit allocation, are themselves biased. Outdated credit systems cause pay equity issues. Period.
Don’t forget the upstream factors that allow lawyers to succeed and drive business. Large promotional or training budgets, inordinate access to rewards opportunities, or media opportunities that are given to some lawyers but restricted to others can have a downstream impact on how quickly and effectively lawyers develop their activities. This should be measured and tracked.
Full-backs upset compensation plans
Starting salary is the single most important factor driving pay equity inequities. If women start low, they will stay low.
Side partners earn 20-30% more than their non-side counterparts. And if you don’t think this has a major impact on pay equity, think again.
Smart companies will analyze the salary of lateral and local partners, to fill these gaps. Also beware of the unicorn partner. Too often the promise of a side partner does not materialize, but the company is responsible for the resulting pay equity issues. A technology solution to assess starting salary can close these gaps before they start.
Workplace equity is becoming too important to be relegated to a side project. Companies need to know if their compensation policies are working as intended and have the data they need to prove it. Staying away is not an option. Welcome to the era of transparency.
This article does not necessarily reflect the views of the Bureau of National Affairs, Inc., publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Christine Hendrickson is the Vice President of Strategic Initiatives at Syndio, which provides advanced technology solutions and expert advisors to help employers with real-time compensation and workplace equity. Prior to joining Syndio, she was a Partner and Co-Chair of the Pay Equity Group at Seyfarth Shaw LLP.