Herbert Smith Freehills will introduce a new remuneration system for the 2015 financial year which will see legacy Herbert Smith move away from its more rigid lockstep system towards Freehills’ more performance based approach.

Key points of this development include a global managed lockstep and a single global profit pool.  A bonus pool will be available for high performers. The firm has also made provision for legacy Freehills partners to have a larger performance-based component, a measure which was introduced to allay concerns that high performing Australian partners might have to take a pay cut under the new system.

The full statement from Herbert Smith Freehills is reproduced below.

Following endorsement by its global partnership, Herbert Smith Freehills will introduce a new partner remuneration system at the start of the 2014/15 financial year.  The system is in line with the pre-merger commitment made by Herbert Smith and Freehills to implement a modified lockstep for the new firm, which responds to market demands.

The firm set a bar high for the partnership vote, requiring a 75% majority in each of the global partnership and the two legacy partnerships. This was the first and only partnership vote on the issue.
At the heart of the system is a global managed lockstep and a common approach to its management.
The system achieves the goal of a unified partnership with one global profit pool.

Partners' performance will be assessed using a consistent global balanced scorecard approach.
The core elements of the modified lockstep system will be the same around the world. There will be a common bonus pool used to reward exceptional partner performance.

There will also be a variable, performance related component to the system that is specific to Australia partners above a certain point in the lockstep. This reflects the nature of partner remuneration systems in the Australian market.