Most lawyers focus on billables when thinking about compensation. But law firm economics don’t work that simply.
Two lawyers at different firms could bill the same number of hours—yet one takes home a significantly bigger check.
Why?
Because compensation isn’t just about hours—it’s about how firms distribute profits. If you’re a senior lawyer looking to maximize your earnings, understanding how law firms actually make money is the key to negotiating better.
1. Not All Law Firm Profits Are Created Equal
Many firms tout their Profit Per Equity Partner (PPEP), but what they don’t always tell you is how that profit is split.
- Some firms prioritize origination credit—meaning rainmakers get the biggest cut.
- Others use lockstep models, rewarding longevity over immediate revenue.
- Some firms have aggressive overhead costs that quietly eat into payouts.
What to do:
- Don’t just ask about PPEP—ask how profit is distributed among partners.
- Research whether the firm rewards business development or just pure billable hours.
- Understand whether you’ll actually benefit from the firm’s success or if it’s concentrated at the top.
2. Origination Credit Can Make or Break Your Paycheck
Most firms reward the lawyer who brings in the client, not just the one doing the work. But origination policies vary wildly, and the wrong structure can cost you hundreds of thousands of dollars over time.
What to do:
- Ask whether the firm has tiered origination credits—some firms reduce payouts over time.
- Clarify who gets origination credit when a client works with multiple departments.
- If you’re bringing clients, make sure you’re the one benefiting from them.
3. Equity Partner Doesn’t Always Mean Big Money
Many firms now offer non-equity partnerships, which sound prestigious but don’t always come with profit-sharing rights.
What to do:
- Find out if you’re expected to buy into the firm—and what the terms are.
- Understand how equity dilution works—some firms spread equity too thin, reducing payouts.
- If non-equity is your only option, make sure the fixed salary is worth it.
Final Takeaway
Senior lawyers who take control of their compensation:
- Understand profit distribution, not just billables
- Maximize origination credit opportunities
- Negotiate firm support for business development
Before your next career move, make sure you’re not just earning more—but keeping more.
Explore how Esquire Talent Consultants can streamline your talent acquisition process and connect you with top-tier legal talent.
