Kingsley Napley latest UK firm to move towards merit-based system

Kingsley Napley is the latest UK firm to put more emphasis on performance-based remuneration when determining its partners’ pay.

The firm, which turned over £27.8m during the 2012/13 financial year, now issues a higher remuneration level to equity partners who show outstanding performance as part of a revamped appraisal system.

Managing partner Linda Woolley told The Lawyer that the firm has amended its equity partner remuneration policy from a flexible 50-100 points lockstep, with a bonus pool of £100,000 available to be distributed on a merit basis, to a 65 per cent lockstep and 35 per cent merit-based distribution model. 

“The percentages are based on budgeted profits,” added Woolley. “If profits are greater or lower the percentage distributed through the merit-based element is proportionately greater or lower.”

The London-based firm did see a slight increase in its average profit per equity partner (PEP) during 2012/13, from £400,000 to £405,000. The firm had 13 equity partners in 2011/12 and 11 in 2012/13, with total partner numbers dropping from 45 to 40.2. Exits over the year included the resignation of property partner Liam MacDonnell, who joined Lord Sugar’s real estate arm as general counsel (22 October 2012). Equity spread during 2012/13 was more or less the same as the year before, ranging from £157,000 to £550,000.

The firm joins a string of UK firms to move away from what is seen as an increasingly outdated model. Travers Smith also concluded its associate pay review earlier this year (26 June 2013), opting to maintain its lockstep structure for junior associates but adding in additional flexibility for those working “excessive” hours or approaching partnership level.

Travers will continue to operate a lockstep for junior and mid-level associates, offering firm-wide bonuses at year end. However, it will offer an additional one-off payment to those who have experienced “excessive disruption” in their personal lives, and new flexibility for associates with six years’ post-qualification experience (PQE).

Earlier this year Slaughter and May abandoned its rigid associate lockstep to put more emphasis on performance (17 January 2013). The news follows similar switches away from associate lockstep by firms including Freshfields Bruckhaus Deringer and SJ Berwin, which have both ditched the system in favour of performance-related pay since September 2011. 

The trend away from post-qualification experience (PQE) remuneration began in earnest around the middle of the last decade. In the wake of the Employment Equality (Age) Regulations 2006, firms became concerned to avoid claims on the basis of appearing to financially reward seniority over other factors.