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Mobility rises among lawyers, but pay packages lack clarity

Lawyers with seven years of experience at top corporate law firms could earn between Rs22-55 lakh a year
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First Published: Thu, Nov 22 2012. 08 17 PM IST
Graphic: Ahmed Raza Khan/Mint
Graphic: Ahmed Raza Khan/Mint
An online survey of more than 400 law firm lawyers and interviews with over 30 lawyers conducted by legal industry website Legally India have disclosed that lawyers with seven years of experience at leading corporate law firms could earn between Rs.22 lakh and Rs.55 lakh a year, but that there are large pay scale gaps and little transparency even within the same firm.
At law firms such as the Mumbai and Delhi offices of Amarchand Mangaldas Suresh A Shroff and Co., J Sagar Associates (JSA), Khaitan and Co., Luthra and Luthra, S&R Associates and Trilegal, or of AZB and Partners in Mumbai, lawyers can get paid the most coming straight out of college: This would start at a base salary package of around Rs.10 lakh per year, going up to between Rs.12 lakh and Rs.15 lakh per year, including the bonus component, as reported in Mint last year.
On average, total compensation, including bonuses, in this top tier of paymasters would then increase by around 10% year-on-year until a lawyer has four years of post-qualification experience (PQE).
By the fifth and sixth years of PQE, total compensation would go up by an average of around 20% each year across these firms, increasing yet again by more than 30% on average to seven years of PQE. For the very top performers at the six- to seven-year levels, the maximum total remuneration can even have increased by as much as 44%.
This would translate to a total package of Rs.55 lakh per year, which would be a base remuneration of around Rs.36 lakh per year, and a bonus of up to Rs.19 lakh. And occasionally there are outliers even beyond those limits.
Some associates at AZB Mumbai, Amarchand and S&R can be at the top end of that range. At AZB Mumbai, for example, associates’ salaries for the first three years increase between 15% and 25% plus up to around two months of salary paid as a bonus. But after that level, all bets are off about standard ranges, and income will fluctuate widely between lawyers.
While job mobility of lawyers has continued increasing, most lawyers have very little idea how much they could earn elsewhere. Many law firms have reasons to prefer keeping it that way.
AZB associates also receive 7% of the first bill for a new client they introduce to the firm. The actual bonus amounts, however, appear to be nearly entirely discretionary and subject to the whims of the senior partners, sometimes even acting as an ad hoc reward, said respondents.
Amarchand similarly tends to compete aggressively on salaries at the top end, but lawyers have complained that the system is still impossible to understand. “No transparency about how much I earn or what are my projected earnings; I can never predict bonus amount as it is never linked to performance,” one Amarchand associate said in his response to the survey.
Surprisingly, S&R, which is far smaller than any of its other rivals in the same tier, is actually at the undisputed top of the pay pyramid, with base remuneration exceeding all others, as well as potentially huge bonuses.
Within the tier, Trilegal is also offering total packages that are near the top of the market, while according to survey data JSA, Luthra and Khaitan tended to offer slightly lower base packages than Amarchand and AZB at the five-year level of PQE. However, Khaitan and JSA, for example, also offered some of the largest bonuses out there: at five years of PQE level, JSA and Khaitan’s base package could be up to roughly Rs.22 lakh, while the bonus might be another additional 70% of that, according to survey responses.
At Luthra, individuals’ bonus payments tended to be a little lower on average last year. The firm has a system where each partner negotiates for their total bonus pool with the firm’s management, which they, in turn, have to allocate between their team.
“God (or may be the firm!) knows the criteria for determining the bonus,” wrote one survey respondent who is working at Luthra, and two other associates interviewed agreed that there was not much transparency about how bonus amounts were calculated at the firm, although some teams’ partners set out bonus targets more clearly.
At firms that are in the second tier, according to the salary they pay—such as Argus Partners, AZB’s Delhi office, Desai and Diwanji, Nishith Desai Associates and Wadia Ghandy—remuneration rises more steadily on average.
Typical starting remuneration, including bonuses, generally vary between Rs.9 lakh and Rs.11 lakh at these firms, but that then increases by around 15% every year until PQE five- and six-year levels. At five-six years of PQE, the increments are almost 20% on average and into year seven, the hike is around 25% on average.
Designations are usually bestowed at firms alongside the salary increases. At Amarchand, Luthra and Khaitan, for example, senior associate status is usually endowed after year four or five, while the principal associate tag at Amarchand comes around year six-seven for most.
However, at most firms this system is also discretionary or based on performance, and neither advancement nor bonus amounts are guaranteed.
“Lawyers at five-year (PQE) level are in the sweet spot, we want to retain them,” explained one senior partner at a large Mumbai firm about career progression and salaries, who did not want to be named.
Those lawyers have enough experience to be able to work relatively unsupervised, said the partner, and manage their own teams of younger associates. This meant that they are also the drivers of a large part of fees generated by the firms for clients, and are on the cusp of the path to the even more lucrative principal associate level.
Losing a senior associate is, therefore, an expensive affair, which explains the wide range in remuneration that starts opening up. At that level and above, salaries are almost always individually negotiated at most firms surveyed, leading to large disparities and a lack of transparency even in the same organization.
There is a series of famous experiments conducted by Harvard behavioural psychologist B.F. Skinner about a rat in a box, with a lever that delivered food to the rat when pressed. In one set-up, a fixed number of lever presses would produce food for the rat every time. Here the rat would stop working the lever once the food stopped coming out of the machine.
But under an alternative set-up, the rat was given food after a randomized number of lever presses, making it akin to gambling on a slot machine. That rat would work the lever harder than the rat in the predictable box, and crucially that rat would also continue working the lever frantically even after food stopped coming out of the machine at all.
The parallels to bonus structures in companies and especially law firms are obvious and often drawn. While associates may all gripe about not being able to predict how much they will earn in this year’s bonus, the unpredictability of the situation often means that associates will work as hard as humanly possible in the hope that this might be enough to earn the maximum possible bonus.
A fair few burn out along the way, of course, and, according to Legally India satisfaction survey data published in Mint last year, only 15% saw themselves remaining in the same law firm three years from now—no matter what the pay hikes will be.
Gender differential?
Mumbai: Interestingly, the surveyed sample data did not clearly back the existence of overt gender discrimination, although roughly three times as many male lawyers responded to the survey as female lawyers, which is indicative of a gender imbalance in the legal profession as a whole that gets more pronounced with seniority, according to response rates.
In the first four years at law firms, the survey data did not disclose any statistically discernible differences in the salaries earned between men and women in top tier corporate law firms, but there was not enough data available at the more senior levels to allow making significant conclusions.
And although just over 20% of surveyed women working in law firms said they strongly agreed that the “legal profession had barriers that prevented women succeeding”, around 80% of women did not agree with this view. Among men, 90% did not agree with the statement that women faced barriers, although 10% strongly agreed.
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First Published: Thu, Nov 22 2012. 08 17 PM IST