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article imageQ&A: How gender pay issues can be tackled in the legal sector Special

By Tim Sandle     Apr 21, 2019 in Business
London - Many countries have legislation in place that make it illegal to pay men and women in the same role different amounts, however men continue to dominate higher paid roles. An expert advises how this can be tackled in the legal sector.
According to Bridget Deiters, UK managing director of InCloudCounsel, a legal tech company, the gender pay gap within the legal industry is particularly disproportionate, as only 20 percent of partnerships at law firms are made up of women.
This type of finding leads to the question of how the legal industry can even the playing field in terms of gender pay equity? InCloudCounsel is working to solve the gender pay gap within the legal industry by using a flexible, remote work arrangement that ties lawyers’ earning ability to the amount of hours that they want to work. As a result, InCloudCounsel’s highest earners actually skew female, with 58 percent of all money paid going to women.
In conversation with Digital Journal, Bridget Deiters explains more about gender pay issues and measures that can be taken within the legal sector.
Digital Journal: What is the typical size of the gender pay gap in the legal sector?
Bridget Deiters: The answer to this question requires a fair amount of context. One of the reasons the gender pay gap reporting requirements were enacted in the U.K. was that it has historically been difficult to quantify the gender pay gap. In the legal sector, many critics of the U.K. requirements question the methodology prescribed, arguing that law firm compensation is too complex to distill into tidy quartiles and medians.
The magnitude of the gender pay gap can be affected by many significant variables, such as: the ratio of lower-earning (mostly female) support staff to fee-generating lawyers, whether partner income is included in the calculations (regulations currently do not require partner income to be included) and whether the firm has a lock-step compensation model or some more hours-driven or bespoke compensation matrix.
One reason it has been difficult to ascertain the typical size of the gender pay gap in the legal sector is that law firms are privately owned, so until now in the U.K. they generally weren’t required to make periodic disclosures about compensation. Before the U.K. gender pay gap reporting requirements came into effect in 2018, not only was there no regulatory impetus to cause law firms to disclose compensation information, but there was an incentive to keep this information as confidential as possible given the severity of the gap.
In other words, the typical size of the gender pay gap in the legal sector is complicated. That being said, the average gender pay gap for the 25 largest U.K. law firms by revenue was 20 percent. This means that for every pound a man earned in 2017 at those firms, a woman earned 80 pence. Importantly, in the U.K., only employers with over 250 employees need to report their gender pay gap data, meaning smaller firms that are said to allow for better work-life balance are not reflected in the reported numbers.
DJ: Is the gender pay gap bigger in law compared to other sectors?
Deiters: Yes. For legal professionals, the gender pay gap is almost two times greater than the 9.1 percent average pay gap reported across sectors in the U.K. The legal sector is not unique in this regard. Tellingly, many other high-paying jobs, such as chief executives and senior officers, medical practitioners, and financial institution managers and directors, have gender pay gaps as severe or worse than the legal sector’s pay gap. As the average compensation for various sectors decreases, in fact, the gender gap tends to narrow, meaning women tend to earn on par with men in lower-paying jobs.
DJ: Is the problem linked to too few women entering legal roles?
Deiters: No. The data shows that the issue is retention, not recruitment. April 2018 numbers showed that 54% of legal professionals in the U.K. were women, but despite this proportion in favour of female lawyers, there is a gender pay gap of over 16 percent. This indicates that there are plenty of women recruited into the legal profession, but that few of them are retained to reach the highest pay levels.
On average, women outnumber men in all four pay quartiles of U.K. law firms. For U.S. and international firms reporting in the U.K., women outnumber men in all but the top pay quartile of those firms on average. Gender pay gap reporting for U.K. law firms indicates that on average the lowest quartile of employees was comprised of 26.5 percent men and 73.5 percent women.
The highest quartile was comprised of 47.8 percent men and 52.2 percent women. It should be mentioned that the U.K. reporting requirements do not allow for a distinction between legal professionals and non-professionals employed at law firms. That being said, assuming fee-generating legal professionals comprise the highest quartile of law firm employees, in U.K. firms, there are actually more women in that echelon than men, but the women in that quartile are being paid less than the men in that quartile.
DJ: How can businesses better understand the size of the problem in their firms?
Deiters: Some say that what can be measured can be managed, but for the gender pay gap to be diminished, perhaps the more important thing for law firms to understand about their gender pay gaps isn’t their magnitude but rather why those gaps exist. To understand gender pay gap problems in full, law firms need to look at both (1) quantitative data produced as a result of the reporting requirements and other metrics they can calculate beyond the regulatory requirements and (2) qualitative indications of what is causing the gap. U.K. gender pay gap reports provide useful insight into the magnitude of the issue at different levels of income, but the methodology does very little in terms of helping firms understand the causes of or solutions for such severe gaps.
In terms of quantitative analyses, the gender pay gap reporting requirements prescribe what must be reported, but nothing is stopping law firms from digging deeper into their metrics to analyse their retention rates of men and women over the course of the partner track, the number of hours worked by men and women (and whether that has an impact on retention of and pay to either gender), or the monetary value of the work being done by men and women (both in terms of income to the firm and in terms of deal size or amounts being litigated).
For example, it is likely that a lawyer who spends 40 hours per week working on high-value work for important clients will be retained longer and paid more than a lawyer who spends 40 hours per week working on low profile work. Law firms track every hour each of their lawyers spends working, so they should be able to identify whether over the course of the partner track men or women are more likely to receive the projects that, hour-for-hour, are more attractive. The gender pay gap reporting requirements do not mandate these quantitative analyses, but without them firms won’t be able to understand the severity of their gender pay gap in full.
On the qualitative side, surveying employees and tracking exit interview responses are obvious ways to identify gender pay gap drivers. On the assumption that senior legal professionals earn more money than junior ones, it is important for law firms wishing to narrow their gender pay gaps to understand what drives lawyers’ decisions to stay at a firm or leave. Some of the reasons have to do with traditional gender roles with respect to dependent care.
For example, according to the American Bar Association, almost half of women identified caretaking commitments as important or very important factors in why they left their law firm jobs, whereas only 20 percent of men cited caretaking as a reason for departure. In that statistic, traditional gender norms are probably cutting both ways: women may do more caretaking than men as a result of those norms, but also as a result of those gender norms women probably feel more comfortable than their male counterparts when it comes to reporting dependent care as a reason for leaving the firm.
DJ: What measures can legal firms put in place to improve gender imbalance?
Deiters: Law firms can adopt several of the measures InCloudCounsel, a legal technology company, has in place to decrease the gender pay imbalance. InCloudCounsel has outstanding retention rates for men and women alike, and female solo practitioners on our platform actually earn more than their male counterparts on average. There are several aspects of our legal process outsourcing model that allow us to maintain this balance. For one, attorneys who work on our platform work entirely remotely, which means there is no “face-time” expectation. This flexibility with respect to location allows men and women alike to meet obligations outside of work without negatively impacting their career trajectories, an important option when so many attorneys who leave law firms cite dependent care as a reason for their departure.
Law firms should also consider modifying their “up-or-out” partner track if they want to retain more women. Studies show that women with college degrees tend to start having children an average of 7 years later than women who do not have a college degree. The reason for this is thought to be the time it takes to establish a career and generate income following college. Following that logic, it can be assumed that women with professional degrees, like lawyers, probably start having children even later.
The average age of women in New York City with college degrees to have their first child is 32.9; in San Francisco, it’s 33.4. With partner tracks generally ranging from 7 to 10 years, the time most female lawyers are having children coincides with the time when they are under consideration for partnership. The “up-or-out” model can leave some women feeling that they have to choose between having a family and reaching the highest rung on the law firm ladder, and many women leave law firms as they choose the former. At InCloudCounsel, there is no looming deadline for career development. This allows men and women alike to plan their career trajectory around their personal lives.
DJ: What strategies can be adopted?
Deiters: InCloudCounsel also has a fixed compensation model that gives lawyers total transparency with respect to their income. Law firm compensation can be affected by market conditions, deal flow and case flow, performance relative to peers, and team size, but it often isn’t until an annual review or a year-end bonus that lawyers know whether those factors had an impact on their earnings. Even then, it isn’t entirely clear whether earnings are performance-based, hours-based, or some combination.
This lack of transparency combined with reported statistics showing that men are paid more than women in law firms often leaves female lawyers feeling disenchanted and unmotivated. With the fixed InCloudCounsel compensation model, the only variable with respect to compensation is how many documents the lawyer has worked on. More documents equals more earnings.
Finally, InCloudCounsel allows its lawyers to moderate their capacity to work on our platform in a way that traditional law firms have not. Many women indicate that the challenges to ramping off and ramping back on for parental leave in the law firm setting affect their decision to stay at the firm. At InCloudCounsel, our teams are easily scalable to accommodate instances of parental leave, health issues, and other personal time. Our lawyers can increase or decrease their capacity as needed during hectic or quiet times in their lives.
Law firms argue that it is client demands, not any discriminatory practices, that result in the gender pay gap. This finger-pointing isn’t completely unjustified, as law firm partners are often simply responding to client requests with respect to staffing. But clients are beginning to understand that their demands are affecting diversity in law firms. In January this year, 170 general counsels signed a letter telling law firms they are “disappointed to see that many law firms continue to promote partner classes that in no way reflect the demographics of entering associate classes.”
The GCs’ disappointment includes the fact that partner classes at law firms “remain largely male,” and, as a group, they committed to direct their business to those law firms that “manifest results with respect to diversity and inclusion.” Adopting measures like those used by InCloudCounsel will allow law firms to manifest the results their clients are demanding.
More about Legal, Law, Women in the boardroom the gender pay gap returns, Pay gap, gender pay gap
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