It pays to understand the multiple components of legal department compensation

Compensation as that term applies to legal departments has many components. I have assembled below some posts on five of them (See my post of July 21, 2008: compensation accounts for largest portion of a law department’s internal budget; and Feb. 28, 2006: explain the value of compensation and benefits over time.).

Base. Every employee has a cash salary (See my post of March 24, 2005: no cost-of-living differences when comparing compensation levels in an industry; and June 15, 2005: Asian general counsel and their base compensation.).

Spot cash awards. Some law departments give employees checks for outstanding performance on projects (See my post of July 28, 2008: difficulties associated with their dispensation; and Nov. 8, 2007: on-the-spot awards for superior performance.).

Bonuses. Based on company, department and personal performance, employees may receive cash bonuses after the end of a fiscal year (See my post of Feb. 21, 2007: misconception for in-house lawyers as to the “extrinsic incentives bias”; April 8, 2007: criteria for attorney bonuses: individual and company performance, but what about departmental; and June 30, 2007: bonuses with 8 references cited.).

Stock options, restricted stock, and other equity compensation. Higher level lawyers may receive grants of options or stock (See my post of Nov. 25, 2006: stock options with 11 references: Aug. 12, 2008.)

Benefits. Not to be overlooked in the total compensation package are the supplemental entitlements, such as match awards to 401K accounts (See my post of July 26, 2006: benefits and 12 references cited.).

Other aspects of compensation. Posts have covered many other features of law department compensation, such as wide compensation bands (See my post of Dec. 3, 2005: broadband your compensation structure, for flexibility and administrative benefits.). Other posts concentrate on the importance of maintaining internal equity (See my post of Oct. 10, 2005: purchase power parity and global compensation costs; April 22, 2007: purchase power parity and some possible glitches; July 14, 2005: disclose compensation ranges at each level in the department; March 26, 2005: does search-firm bias inflate compensation benchmarks; and March 17, 2006: comp chasm between corporate law departments and other staff groups.).

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