Watson Farley creates bonus system for fixed-share partners in light of HMRC tax reform
Watson Farley & Williams has revamped its remuneration structure in response to HM Revenue & Customs' (HMRC) overhaul of tax rules for professional partnerships.
May 27, 2014 at 06:47 AM
2 minute read
Watson Farley & Williams has revamped its remuneration structure in response to HM Revenue & Customs' (HMRC) overhaul of tax rules for professional partnerships.
The firm's 20 fixed-share partners in London will put just over 20% of their earnings into a new fund. This will later be redistributed as year-end bonuses, conditional on the firm's performance.
Co-managing partners Chris Lowe and Lothar Wegener have overseen the changes. In January the duo replaced longstanding managing partner Michael Greville, who had led Watson Farley since 2001.
The firm's salaried partners unanimously backed the model, known as a "variable share" structure, during a consultation that gave them a choice between the new system and the option of remaining as fixed-share partners.
The decision means that the firm will not have to pay national insurance contributions for junior partners with small shares in the business.
Under the new rules, junior partners must meet at least one of three conditions to maintain self-employed status: at least 20% of an individual's pay must be dependent on the firm's profits; at least 25% of their fixed pay must be contributed in capital; or they should demonstrate they have significant influence on the overall partnership.
The majority of City firms have responded to HMRC's new rules by asking junior partners to put in extra capital. These include CMS Cameron McKenna, Hogan Lovells and Eversheds.
Meanwhile, the likes of Withers and Ashurst have increased the variable element of junior partners' pay that is linked with the firms' performance without requesting additional capital, with the former adjusting arrangements for 25 junior partners.
Related: Top firms call on junior partners to up capital contributions as new HMRC rules go live
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