Global law firm Freshfields Bruckhaus Deringer has revamped its benefits package to help keep it at the top of the profession, says Debbie Lovewell
Whatever the state of the economy, law firms stand to benefit in some way. The credit crunch and economic downturn may have dampened merger and acquisition activity and large property transactions in the UK, but it also means lawyers are being kept busy chasing debts on behalf of clients and representing administrators. If they are a global organisation, firms are also likely to reap the rewards of serving clients based in countries that are experiencing significant growth.
Like many of its closest competitors, Freshfields Bruckhaus Deringer posted record profits for the financial year ending 30 April 2008. During this period, the firm's turnover increased by 19.5%, to £1.18bn from £986 million in the previous financial year. A significant portion of this was generated by its London office, but offices in China, Moscow and the Middle East are also thought to have contributed to driving this growth. Average profit per equity partner - a measure widely used to gauge law firms' profitability - increased by nearly 40% to £1.44 million, up from £1.03 million in the previous year.
But it has not all been plain sailing. At the end of the 2003-2004 financial year, profit per partner and turnover were both in decline and Freshfields Bruckhaus Deringer decided to axe its all-equity partnership structure. The move cost it millions, but brought it into line with other top legal firms by allowing non-equity partners into its ranks.
Earlier this year it also faced a high-profile legal challenge from an ex-employee alleging direct and indirect age discrimination following changes made to the partners' pension scheme in 2006, which he claimed had forced him, as an older worker, to retire early. In the case, Bloxham v Freshfields Bruckhaus Deringer, the tribunal found that the less favourable treatment was justified and that modifications to the pension scheme to make it fairer to younger partners was a legitimate aim.
In the first year of including non-equity partners in its management structure, Freshfields Bruckhaus Deringer was named the UK's top-performing law firm in terms of net profit in The Lawyer's UK 200 annual report 2008, having clocked up £595 million in net profits for the year ending 30 April 2008.
But maintaining such performance levels may prove difficult in the coming months. The Confederation of British Industry's latest Services sector survey, published in August, showed many business and professional services firms had begun to report a drop in business volumes for the first time since 2003.
Staying competitive is therefore a key objective for Freshfields, making the need to attract and retain top legal talent a vital component of its bid to remain one of the leading law firms in the market. Gary Wilkins, head of compensation and benefits, says its benefits package has a key role to play in achieving this aim. "The legal market is highly competitive, so it is important that the benefits package we offer to prospective and existing employees is at the top end of the market. It certainly helps to attract and retain staff. I think it's almost seen as a given if you join a large city firm that the benefits on offer are going to be competitive," he says.
Flexible benefits In the past year, the company's benefits package has undergone a significant revamp, at the heart of which was the launch of its flexible benefits scheme, branded Benefits Plus, on 1 July. Previously the benefits package had comprised mainly core perks, alongside some voluntary benefits.
"In the context of flexible benefits, take-up to date among employers in the legal market has been fairly low as far as we understand, although we understand a number of companies may be looking to do something in this area in the near future. So, at the moment, having a flexible benefits package is a way to differentiate ourselves from market competitors. We wanted to give staff more choice and flexibility in the benefits available to them. We also introduced some new benefits as part of the launch and introduced the opportunity for people to extend the cover to some of their family members," says Wilkins.
In restructuring its benefits package, Freshfields also hoped to increase employees' awareness and appreciation of their perks with the aim of maximising the firm's return on investment. It particularly wanted to build on the information presented to staff through the annual pay and benefits statements that were introduced four years ago.
"Benefits expenditure is quite high and we want to maximise the return on that investment and really position ourselves in terms of benefits as being an employer of choice and market-leading," says Wilkins.
The communications campaign resulted in a 60% take-up of flex at launch, and an increase in the number of employees who have signed up to some of its existing benefits, such as the group personal pension (GPP) scheme.
Take-up "I think it was putting the information back in front of them, for people who hadn't joined to date. Through the online system, there's a net pay modeller, so people could see the cost in terms of their net monthly pay, but also starkly contrast that with the overall contribution going into the pension scheme," explains Wilkins.
When launching flex, the firm added a number of new benefits to the scheme, such as carbon offsetting, bikes for work and dental insurance, as well as providing the option for staff to extend cover to family members on some existing perks. Adam Brooke, flexible benefits manager, says this was intended to make the package more exciting for staff, as well as giving them more choice. The most popular benefits proved to be dental and travel insurance, holiday trading, bikes for work and charitable giving.
But the introduction of flex was not the only change to the firm's benefits package that went live on 1 July. It also brought in a new private medical insurance (PMI) scheme, switching providers to PruHealth; added a new voluntary benefits and lifestyle management scheme, provided by Xexec; and changed its holiday year to bring it into line with its flex year.
Informed choices Plenty of communication with staff was required to ensure they were aware of and understood the changes. "Communication is absolutely key. You have to give people sufficient information so they can make informed choices," says Wilkins.
A vital component of the communications strategy was the offer of one-to-one meetings for all employees with a member of the compensation and benefits team. Brooke says: "It took up a large portion of our time, but sessions were really well used and fully booked up. People came and talked through whole selections. Anyone from our PAs, all the way up to senior lawyers were using the service."
Getting support from a senior level was also key, adds Brooke. "Having support from the managing partner, who sent out an email announcing that the way in which benefits are provided was about to change, was important. It was brilliant to have buy-in from such a senior level."
The compensation and benefits team also worked closely with a number of other departments. "We relied heavily on our internal communications department, which was a huge help in drawing up the strategy to really get our employees to buy into a new and very different concept," says Brooke.
Meanwhile, the firm's internal design team devised the scheme's branding and design for materials, such as its benefits brochure.
Wilkins and Brooke are now concentrating on where they want to go next, and keeping the firm's flex scheme fresh is a key priority. "We want to build on the success of the launch and continue to raise awareness of, and engagement with, the benefits we provide. It's also important to continue to be at the forefront of flex provision in our sector," says Wilkins.
They are also keen to give Freshfields' benefits a more international focus. At present, the firm manages global PMI, life assurance and personal accident benefits for all employees in each of the countries in which it operates, from its London office. All other benefits are managed locally on a country-by-country basis. This is something it is potentially looking to change.
"We would like to undertake an international review of the benefits we provide to see where it might be appropriate to extend some benefits internationally, while at the same time keeping costs under control," says Wilkins.
Whatever Wilkins and Brooke take on, they are certain to take the time to ensure it is right for the organisation. Brooke concludes: "Don't underestimate time because that really is the key thing. Schemes should not be introduced in a rush."†
Freshfields Bruckhaus Deringer at a glance
Freshfields Bruckhaus Deringer was formed by the merger of Freshfields with Deringer Tessen Herrmann and Sedemund, and Bruckhaus Westrick Heller Lober in 2000.
Freshfields' origins, however, can be traced back to 1743 in London, when Samuel Dodd was appointed solicitor to the Bank of England. The firm changed its name, with different partners, until it settled on Freshfields over 100 years ago. Bruckhaus and Deringer were both founded in Germany, the former in 1840, the latter in 1962.
The firm, a limited partnership, now operates in 16 countries, employing 2,500 lawyers and 5,500 staff overall. It advises national and multinational corporations, financial institutions and governments. In the past year, its mandates have included acting for Northern Rock.
In the UK, Freshfields is one of the five members of the so-called Magic Circle of leading London law firms. For the year to 30 April 2008, the firm's turnover increased by 19.5% to £1.18bn, from £986 million in the previous year. Its profit per equity partner rose by nearly 40% to £1.44 million, up from £1.03 million the year before.
This follows a period of restructuring, when it cut a number of equity partners and was unsuccessfully sued on grounds of age discrimination.
Career Profile: Gary Wilkins
Before joining Freshfields Bruckhaus Deringer eight years ago, Gary Wilkins, head of compensation and benefits, spent seven years as a manager in PricewaterhouseCoopers' tax practice, advising multinational companies on tax and compliance issues when moving staff in and out of the UK.
He joined Freshfields as international HR manager tasked with reviewing and implementing international mobility policies following the company's merger with two German law firms. The role then expanded to cover international benefits, leading to his current position.
Wilkins is most proud of his work around international secondments and the launch of Freshfields' flexible benefits scheme in July this year.
Career Profile: Adam Brooke
Adam Brooke, flexible benefits manager, is a relative newcomer to Freshfields, having joined the firm about six months ago. He previously spent 13 years with John Lewis Partnership, most recently as manager of the retailer's voluntary benefits scheme, Partnerchoice.
Brooke decided to make the move to build on the work he had done with the retail giant, while gaining experience of a new sector.
He explains: "The position with Freshfields and what I came in for was actually the implementation of a flexible benefits scheme, so I got to see the whole thing through rather than just carrying out the feasibility study, which was very exciting."
Employee case study
Kathryn Bruce is a trainee solicitor who is currently in the second year of her training contract.
She works in the firm's real estate department, where she is responsible for tasks such as researching and analysing legal issues, providing support for clients, and assisting associates and clients.
Bruce's favourite perk following the introduction of Freshfields Bruckhaus Deringer's flexible benefits plan is the bikes-for-work scheme. "I think it is an excellent incentive to get fit and to promote a healthier lifestyle. By doing this through the work scheme, you can also cover all the necessary safety clothing, lighting and security kit. I think a lot of people have good intentions about doing this kind of thing, but a benefit like this provides the impetus to get on with it," she says.
What are the benefits?
- Defined benefit scheme which closed in 2000.
