Why Bonuses and Incentives Aren’t Fee Sharing
Under the Model Rules of Professional Conduct Rule 5.4 (a), the American Bar Association clearly states that legal fees should not be shared with non-lawyers. The rationale for this rule is to make sure that non-lawyers don’t have undue influence in having a stake in the outcome of a particular case. The theory is that it would be unethical for a paralegal to want to settle a case to earn their portion of a fee. But that a lawyer, as a “professional,” will always and only act in their client’s best interests. This rule is fairly absurd, but for now, we all must live with it.
However, following modern law firm compensation models often encourages incentivizing attorneys and non-attorney employees the same way. We firmly believe this is not unethical, as what you’re sharing isn’t legal fees but ?profits or operating expenses. This is best understood by tying profit sharing or bonus systems to your firm’s key performance indicators (KPIs).
Reward Your Team Based on Key Performance Indicators (KPIs)
For non-attorney employees, you can choose to offer a base salary and a set bonus every quarter for meeting key performance indicators (KPIs). Using this method, not only do your attorneys receive their reward when meeting quarterly goals, but so does everyone else.
Note: Although we believe this arrangement is a splendid choice and not tied to fees, we recommend reaching out to your local ethics authority and researching the rules in your jurisdiction to determine how to best proceed.
Next, we’ll cover how to create law firm culture that supports mental health (Yes!).