For the first time, a law firm is changing the traditional remuneration model and switching to a model based also on a percentage payment for each case (on top of a fixed salary), starting from the first day of employment, even for interns. The aim is to cope with the demand for lawyers in tech sectors, attract employees and then keep them in a competitive market. This is a very exceptional model in the law firm market, which operates on the partnership model, initially promoting lawyers to partners and only subsequently making them "capital partners," entitled to the profits of the firm.
Porat Group, which has 100 employees in Israel and abroad, of which 30 are lawyers, was founded by Adv. Nir Porat. The group, which has been operating in its current format since 2017, specializes in tech industries, and the law firm is engaged in legal activities in commercial law, technology, litigation, labor tax law, and real estate as well as a deeper expertise in tech areas including blockchain, fintech, cryptocurrencies, online commerce, payments, and gaming. In addition to its legal services, the firm provides business and strategic support.
According to the group's managing partner Nir Porat, "The promotion and remuneration prospects currently offered at law firms are not attractive enough and cannot serve as an effective instrument for attracting employees or keeping them," He says that the people that firms are most interested in attracting are fed up with the traditional salary model.
How to reach quality lawyers
For some time law firms have been reporting high demand and difficulties in hiring quality human resources, mainly in the tech sector. The Covid pandemic has caused many to take stock on whether they are in the right place for them, and the coming of age of the millennial generation brings with it a different approach to jobs as well as new expectations in traditional industries and the tech boom has resulted in a huge rise in the amount of work for firms - and all this has provoked law firms into rethinking traditional concepts in terms of work methods.
The need to attract and retain quality lawyers has caused this law firm to "think outside the box" and to abandon traditional remuneration methods in an unprecedented way for the sector. The firm offers a percentage of the income from clients to lawyers and even interns on every case that they handle from the first day, on top of a fixed based salary. In contrast to capital partners at law firms, the Porat model does not deduct overheads but does deduct third party expenses. Every lawyer receives a basic salary and percentages received according to the involvement of the lawyer or intern.
According to Porat, the payment to an employee is about 20% and is divided up between the team handling the case. Sometimes it is the lawyer or intern who has brought the client to the firm and they receive higher remuneration accordingly. For example, the employee who brought the client receives 10%, the partner handling the case receives 5%, with 3% for lawyers and 2% for interns. These percentages change according to the work required and the size of the team dealing with the case.
At Porat Group there is a finance department responsible for calculating costs and expenses and they examine profit margins and build remuneration brackets for every type of work and every grade of employee.
If an employee does more work and deserves more, then the percentage rises. If several lawyers worked with the same client, then the percentages that the firm gives is divided up between the employees and this will be known ahead of time and agreed in advance by everybody. "Ultimately there is a certain slice of percentage that the firm can distribute while still retaining its profit margin," Porat added.
Transparency in income from clients
Another aspect and no less important is that the firm acts with transparency regarding payments from clients.
Porat said: "Everybody knows and with transparency how much the client pays and how much net profit the firm makes, and how much are the firm's overheads and what percentage overheads belong to each client. This is a different level of transparency and management."
Adv. Boaz Lessem, has worked for the past year in the firm's commercial department. He said, "The model that I was looking for in order to develop very much fascinated me. People who are hard working in their basic nature will be rewarded according to their work. The method creates a professional, serious and efficient work environment. It creates prospects both for you as well as the employees under you and the hierarchy is less rigid."
Shahar Bar-on, an intern who has been with the Porat Group for seven months, also receives percentages for the clients who he brings to the firm and from handling cases. Bar-on came with extensive tech knowhow and specializes in the blockchain, fintech and cryptocurrency department. He talks about percentages of between 2% and 3% per case that he deals with and up to 10%, if it is a case where he brought the client.
Promotion prospects in firms are not attractive
Porat explained that the change stems from the understanding that "promotion prospects currently offered in firms in which young lawyers are forced to wait almost ten years (in a best case scenario) before beginning to receive a slice of the profits pie is no longer attractive and cannot serve as an effective instrument for attracting and keeping employees.
"It is clear to us that the new model will shake up the existing system and impose bigger obligations on lawyers - and this won't be suitable for everyone but it will certainly cause a person to think how they want to spend their time. The existing model of only a basic, set salary is not appropriate for people possessing business, entrepreneurial or managerial potential who want to advance and take on more for themselves.
Porat added, "The idea is to give to every lawyer a feeling of belonging and partnership and financial interest and to keep and increase activities with clients. The aim is not only to reward people who we are interested in hiring but also to keep existing employees at the firm, while creating a genuine interest in the work and the clients as well."
What is the difference between what you are doing and a bonus?
"In contrast to bonuses, which are usually a specific bonus over a certain achievement and given at the discretion of the employer, our model is granted as a set and continuing remuneration for every employee, according to the work and the cases that they manage or handle."
Do you give different remuneration to people with different seniority?
"Absolutely. A lawyer with 10 years of experience is not due to the same remuneration as a young lawyer and the reverse. Accordingly, whoever manages the case is not due the same remuneration as somebody who only worked on it."
Do you think that this is a model that will catch on at other firms?
"From the conversations that I have had, it is clear to us that what we are doing is very innovative and almost futuristic. Consequently it won't be suitable for everybody and certainly not in the first stage. Having said that I assume that more progressive law firms that want to retain their employees and push them into doing more and nurture their potential and hire talents - will have to do this - whether through their own initiative or whether reality will force them to do it. I'm ready to take a risk and say that firms that don't take up the challenge of the remuneration model for themselves are in danger of being left behind and perhaps even being wiped out in the future because quality, creative, and entrepreneurial human resources will leave and with them the clients, strategic partners and the business opportunities."
ID
Porat Group
Line of Business: Business and strategic development and legal activities.
History: In 2017, the company became a group that also provides business and strategic support.
Employees: 100 employees in Israel and worldwide.
Something more: The founder and managing partner Adv. Nir Porat is interested in providing every lawyer of his with a feeling of belonging and partnership, and an economic interest in the firm's success.
Published by Globes, Israel business news - en.globes.co.il - on November 8, 2021.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2021.