It is often said that a strong PEP figure helps firms to attract and retain the best talent. However, many law firms who are overly-focused on profit per equity partner (“PEP”) as the key measure of success, risk hard-baking unlawful discrimination into the strategy and culture of their firm.
The term PEP has, for many law firms, law firm management consultants, and industry publications, become the dominant barometer for assessing the financial health and sustainability of law firm partnerships in recent years. Broadly speaking, PEP is calculated by dividing the annual profits of a firm by the number of equity partners (not including fixed share or salaried partners). The race to increase PEP year on year has become part and parcel of law firms’ strategy for a variety of reasons (and not just for the obvious reason of increasing equity partner remuneration).
