Freeth Cartwright has overhauled its remuneration system after realising that partners found it baffling.
The firm is sticking with a principally merit-based system, but has dumped its seniority weighting element in favour of an alternative that makes it possible for a new equity partner to be the firm’s highest earner within five years.
Chairman Colin Flanagan said: “We tried to remove the weighting element to simplify it. Under the old system I had to sit partners down and spend one and half hours explaining it to them. It’s not something that can be summarised in a simple sound bite.”
Under the old system partners were allocated points over five years, with a maximum of 40 points each year, and with a weighting on a sliding scale in favour of the points gained in more recent years.
Under the new system the complex weighting element has been slashed.
Flanagan said: “This modification results in removing the potential confusion caused by the weighting and is likely to widen the gap between bottom and top of equity.”
Partners will be allocated profit points on the basis of performance during a four-year period. There will be a maximum of 20 performance points allocated in each year, making 80 points the maximum total that can be attained.
A small bonus pool of 2.5 per cent of total profit, excluding fixed shares, is also retained to reward exceptional performance in one year.