How do you ensure transparent compensation for lawyers working together at your firm? Law firm compensation can be a contentious issue, and if you get it wrong, you risk alienating firm members or breaking up your partnership.
For many small- to medium-sized law firms, some form of the “eat what you kill” model is an obvious choice. Each lawyer gets paid for the hours they bill (less expenses and overhead), so everyone gets paid fairly. Rockstar lawyers stick around because they’re compensated in proportion to the amount of work they do, and everyone else benefits from the positive reputation brought to the firm.
Of course, this model has its issues—it favors billable work above all else, and it’s not always clear how to account for firm administration tasks. Still, when done right, using the “eat what you kill” model is a straightforward way to ensure a clear compensation structure at your law firm.
There’s just one problem—how do you keep track of how much work everyone’s doing? For example, if Sally helped draft an argument for Adam’s case, how do you ensure she’s fairly compensated? What percentage of the client’s next payment is she owed?
You could keep a ream of spreadsheets to compare everyone’s billables and then calculate contributions in proportion to each other, but that isn’t the best use of your time—or your staff’s. Alternatively, you could require that everyone stick to their own matters, but that isn’t realistic. Worse, it doesn’t exactly encourage a collaborative firm culture.
So, what’s the easiest way to implement fair compensation at your firm? Use a Fee Allocation Report.
What is a Fee Allocation Report?
A Fee Allocation Report lets you see who billed what on a given Matter, without having to do any manual calculations or cross-referencing.
This report is available for Clio Elite subscribers. Here’s an example of a report generated by Clio:
Want to see the Fee Allocation Report in action now? Upgrade today for a clear view into who’s doing what at your firm.
The “Service Allocation” column refers to how much work a lawyer did on a given Matter as a percentage of all work done. You can see how much each lawyer contributed to a Matter’s expenses as well.
In Clio, you can also filter Fee Allocation Reports by Originating Attorney, Responsible Attorney, Client, Matter, Practice Area, and more:
This can be useful if you want to take a quick look at how many hours a certain attorney is billing.
In addition to ensuring fair compensation, these filters can be useful for assessing the productivity of individual staff and your firm as a whole. For example, which attorneys are bringing in the most business? Once you have a view into this, you can start to work out why they’re doing so well—and look for ways to repeat their success.
Want a more in-depth overview of this report? There’s a whole lot more information on our Fee Allocation Report support page!
How to use Fee Allocation Reports to ensure transparent compensation
How can you put Fee Allocation Reports to work for you? Each time a payment comes in for a matter (even if it’s only a partial one), you can easily allocate proportional amounts to each lawyer who worked on the matter.
Here’s an example: Both Don Draper and Roger Sterling have billed time on a certain matter—60.87 percent and 39.13 percent respectively. When the client pays $500 of her total bill ($1,150), Don gets 60.87 percent of that, or $304.53.
This works when expenses are involved too. For example, if Don is responsible for 100 percent of expenses on a certain matter, he’d get 100 percent of payments toward expenses.
It’s as easy as that.
A clear compensation structure with less effort
Transparent compensation is key for the success of your law firm. A strong compensation model ensures that individuals are properly rewarded for their contributions to collaborative efforts, which encourages everyone to keep driving growth for your firm.
But, determining a clear compensation process shouldn’t take up all of your time. Make sure you choose a practice management solution that streamlines the process by quickly showing you how much each lawyer contributes. This way, you can focus on what’s really important—helping your clients and growing your firm.