Lockstep compensation
Encyclopedia
Lockstep compensation is a system of remuneration
in which the employees' salaries
are based purely on their seniority
within the organization. For example, in the legal profession, where this system is most commonly found, all law school
graduates hired by a law firm
who graduated in the same year receive the same base pay, regardless of the background, experience, or ability of each. During the late-2000s financial crisis
, some law firms began replacing the lockstep system with "merit-based" systems.
The lockstep system of compensation has the benefit of being easy to administer, reducing internal competition within firms, and maintaining a single company philosophy. At the same time, however, it has been criticized for being inefficient and reducing incentives for employees to improve performance.
Remuneration
Remuneration is the total compensation that an employee receives in exchange for the service they perform for their employer. Typically, this consists of monetary rewards, also referred to as wage or salary...
in which the employees' salaries
Salary
A salary is a form of periodic payment from an employer to an employee, which may be specified in an employment contract. It is contrasted with piece wages, where each job, hour or other unit is paid separately, rather than on a periodic basis....
are based purely on their seniority
Seniority
Seniority is the concept of a person or group of people being in charge or in command of another person or group. This control is often granted to the senior person due to experience or length of service in a given position, but it is not uncommon for a senior person to have less experience or...
within the organization. For example, in the legal profession, where this system is most commonly found, all law school
Law school
A law school is an institution specializing in legal education.- Law degrees :- Canada :...
graduates hired by a law firm
Law firm
A law firm is a business entity formed by one or more lawyers to engage in the practice of law. The primary service rendered by a law firm is to advise clients about their legal rights and responsibilities, and to represent clients in civil or criminal cases, business transactions, and other...
who graduated in the same year receive the same base pay, regardless of the background, experience, or ability of each. During the late-2000s financial crisis
Late-2000s financial crisis
The late-2000s financial crisis is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s...
, some law firms began replacing the lockstep system with "merit-based" systems.
The lockstep system of compensation has the benefit of being easy to administer, reducing internal competition within firms, and maintaining a single company philosophy. At the same time, however, it has been criticized for being inefficient and reducing incentives for employees to improve performance.