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Fee splits


Cool_name

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I know on the past website there was some helpful information regarding fee splits, but there doesn’t appear to be any on this forum. 
 

Any members on here have experience with them and able to share generalities about them, such as reasonable ranges, when to ask for them, words of caution? 
 

I am interested in splits for junior call (not new calls) civil litigators in big cities, but think all perspectives would be helpful to corrugate here for others looking.

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AnomanderRake
  • Lawyer

I have been looking at this topic because I was offered a fee split compensation package when I start working as a new call. There are generally two forms of fee split arrangements: 

  1. Pure fee split: Pretty much what you think of when you hear a fee split. I have heard of splits as low as 30/70 and as high as 70/30 (first number going to the associate). The average/common range seems to be a 50/50 split or 60/40 (in either direction). Furthermore, different splits are going to include different supports from the firm - from dedicated staff such as LAs/paralegals, to perks such covering professional fees, and so on. There are also different splits based on whether its "your client" or the "firm's client" - though the distinction makes little sense to me and my boss at my new firm had the same attitude when I discussed the matter with him. 
  2. Minimum income fee split: This is when the firm guarantees a minimum income, and then gives you small percentage of everything you bill or switches you over to the pure fee split after you've billed a certain number of hours a week/month. I haven't seen as many numbers for this as the above so I can't give a range. 

In my case I got an offer like the second option switching over the the first option after some time, and I decided to accept it because I wanted to have independence in my work (it might be my arrogance, but I feel like a lot of lawyers are very disorganized, don't give a shit, procrastinate, and then unload the pain on juniors - I feel like I can do better on my own). It could also be a lot of money (matching big law numbers in a small firm, if I bill well, or making more than I do as an articled student if I bill abysmally). I thought there would be some opportunity cost, but little "real risk" for me to take this chance. 

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Mountebank
  • Lawyer

A local colleague of mine (sole prac solicitor) has a fee split arrangement with his associate. 40% of net collected billings plus LSO fees/insurance/CPD. Associate gets assistant and clerk support. No base salary.

It's actually a pretty sweet deal for the associate - my colleague has built up a large and extremely busy practice.

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  • 3 weeks later...
Phokis
  • Articling Student

I know of a Vancouver firm with fee splits.

Minimum guaranteed  salary that would make me cry, but you get bumped to fee splits if you would make more on the split.

I've heard 40/60 and 50/50. Additional cut of all hours for clients you bring in on top of that.

Pros:

Comp is high in potential. You clear 100k annually for billing 20 hours a week (with two weeks vacation a year). Your annual call year bumps in hourly rates directly translate into increases in earnings, which is also nice.

As you can probably infer, if you have entrepreneurial aptitude you can make a killing even as a junior call.

Generally more independent as well.

Support staff and systems comes out of the firm's end.

Cons:

Compensation depends on you getting the hours. This means you have to have an at least modest book or have to be fairly confident you'll be getting enough work from the firm in the short term. 

Comp also depends on the bills being paid. I haven't heard of any firm in the city operating on fee splits guaranteeing the bills, which means if a client shorts the firm you won't be getting paid for your hours until they pay up or collections go down. This is a definite added risk, though it can be mitigated by retainer practices.

Limited benefits and expenses as the firm hires lawyers as contractors. I've heard this is common practice with fee splits, but can't confirm.

Taxes are more of a pain in the ass since you have to sort out sales and income tax yourself from the net.

 

 

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local_lawyer
  • Lawyer

Curious if anyone has ideas on ranges of fee splits as an employee vs independent contractor and incorporated.

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  • 3 months later...
ATW123
  • Lawyer

I have a number of friends who work at "fee split" firms and most of them are happy.  However, one of the major problems associated with these kinds of firms is that they largely operate as a bunch of solo-practitioners working under one umbrella.  For a new call, this can be problematic because mentorship opportunities can be limited.  Unless Lawyer "A" is able to bill on the file, he or she are not interested in helping Lawyer "B" learn the ropes because that can directly impact their billings.  If Lawyer "A" spends 30 minutes with Lawyer "B" helping him or her with motion materials, that's 30 minutes that they are not billing on their own files and directly impacts their compensation.  

Fee split arrangements are fantastic if you know what you are doing but can be fairly rough if you don't.  

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I also had a very negative experience with fee split when it came to the firm having discretion to write off time. One thing to look out of is whether you get a % of your billed time or your collected billed time. From anecdotal experience, the firm either (a) doesn't have enough to offer you a salary or (b) just wants bodies to take on more and more volume of lower complexity work. Otherwise it's almost always more cost effective for firms to pay you a salary, which is only equivalent of 1/3 of your billable target. It would help if you investigate further into why this firm set their compensation structure this way, and if that aligns with your goals. 

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Hitman9172
  • Lawyer

A friend of mine is on a fee split at a mid-size firm after having worked at a big law firm. From what I understand, his fee split is 45% of his collected fees (collected, not billed) up to a certain amount, 55% on the next $100,000 collected, and 65% on everything collected above it. It's his first year on this split, so I'd be curious to see what he ends up making. He seems to be liking the fee split model though, as he's experienced enough to bring in work himself and to charge fixed fees on many of his files, which usually results in him getting a premium over the time that he actually billing spends on the file. On the flip side, I've heard horror stories about fee splits (on fees collected) from some junior lawyers about their firms delegating them work and then writing off a ton of their time, so that they don't end up actually getting much of a split.

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Phaedrus
  • Lawyer
On 4/6/2022 at 12:55 AM, AnomanderRake said:

I have been looking at this topic because I was offered a fee split compensation package when I start working as a new call. There are generally two forms of fee split arrangements: 

  1. Pure fee split: Pretty much what you think of when you hear a fee split. I have heard of splits as low as 30/70 and as high as 70/30 (first number going to the associate). The average/common range seems to be a 50/50 split or 60/40 (in either direction). Furthermore, different splits are going to include different supports from the firm - from dedicated staff such as LAs/paralegals, to perks such covering professional fees, and so on. There are also different splits based on whether its "your client" or the "firm's client" - though the distinction makes little sense to me and my boss at my new firm had the same attitude when I discussed the matter with him. 
  2. Minimum income fee split: This is when the firm guarantees a minimum income, and then gives you small percentage of everything you bill or switches you over to the pure fee split after you've billed a certain number of hours a week/month. I haven't seen as many numbers for this as the above so I can't give a range. 

I was offered the first option when I was called to the bar. It was a raw deal that I refused. The offering lawyer was a solo and had very high turnover of staff/associates (posts every few months on the law society looking for associates), and the arrangement didn't include admin support. It was fee split for an office, parking space, and access to some office supplies (no assistant). The value of "mentorship" wasn't there, as they only minimally practiced in the areas I was interested in. As green as I was/am, I wanted (and still want) experienced counsel to have watercooler chats about file matters.  

The deal made zero sense, so I declined and held out for a better position elsewhere. It's easy to feel compelled to accept offers or to jump on "opportunity" when it comes knocking on your door, but not all opportunities are created equal. A person has to look out for their personal and professional best interests. Carefully assess offers and be mindful that people will try take advantage of your limited experience - hiring firms, clients, opposing counsel, the lot. 

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