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Chinese firm Jun He in remuneration system shakeup

Posted by: Laurence Simons 17/08/15

Jun He, the Beijing-based law firm, has just undergone its most innovative remuneration structure reinvention since its establishment in 1989. Previously, it operated on a merit-based system, almost totally disregarding seniority points when calculating a partner’s final salary. However, following a successful three year pilot scheme, a new system has been put in place in which 75% of all equity partners will now be placed onto a lockstep system for their profit distributions.

So what does this mean? It means that partners have been designated points dependent on their individual financial contribution to the firm’s total revenue over the past three to five years. On top of this, more points will be given by a compensation committee meeting annually to discuss metrics such as business origination, production of work, management responsibilities, administrate skills and other non-financial contributions. This will then translate into the partners’ total remuneration.

Warren Hua, one of the five new members on the committee, has commented that, “The new system brings partners closer by creating a common economic interest. When the firm performs better, each partner can share a fair piece of the growing pie.” However, he does admit that it will be harder for the more junior partners who will sit highly on the non-financial side of the business, but may not yet have a strong client base and so will not contribute a large monetary total. It could also mean that senior-level partners might be reluctant to share their clients as this will impact on their own remuneration.
 
However, it is worth noting that, due to the firm’s democratic culture, each partner was asked in advance to submit their thoughts about the new system and to disclose whether they would voluntarily move to it. Over 85% responded positively, but the firm has taken only 75% on the trial to limit disruption and ensure that the risk to firm’s business and financial well-being remains low.

But opinions of this style of remuneration remain split – where do you stand on the debate?