Pay & performance

Pay and performance issues can create considerable friction within partnerships and LLPs.

Different firms have different structures and cultures when it comes to rewarding performance (or dealing with perceived under-performance). It is important for you and your advisers to understand both the structure and the culture in dealing with any issues.

In some firms, a more or less egalitarian structure may be adopted. The spread of remuneration within the equity partnership may not be very wide. A relatively poor performance in one year will not necessarily lead to any downgrading within the equity partnership and it is recognised that there are factors affecting levels of business which are outside individual partners’ control. The flip-side to this is that better-performing partners may not be as highly remunerated as they could achieve elsewhere and partners who have an outstandingly good year cannot necessarily expect that to be fully reflected in their remuneration.

By contrast, in other firms a more direct approach may be taken, under which there may be a wide spread of remuneration within the equity partnership and partners may be moved up and down the scale quickly depending on their performance. At the end of this spectrum, remuneration may be on an entirely “eat what you kill” basis (although the definition of what a particular partner’s “kill” is made up of may give rise to debate).

Dealing with remuneration and performance issues for partners andLLP members is very different in firms which take these different approaches. A firm with a relatively egalitarian structure may ultimately be less willing to tolerate perceived under-performance in the longer term, because the under-performance has a greater impact on the remuneration of other partners.

Our work for partners and LLP members in this area includes:

  • advising on the remuneration and profit share terms of partnership andLLP agreements on joining and at later stages;
  • advising on progression and promotion (or the lack of it) within the firm
  • advising on dealing with issues of alleged under-performance
  • advising on exit strategies
  • advising in relation to statutory rights, including unlawful discrimination and whistleblowing
  • where necessary, litigating in relation to remuneration and alleged under-performance
  • settling disputes through negotiation and/or mediation