Your colleague earns twice what you do. But why?

It is the sort of question that sounds straightforward until someone has to put a dollar figure against the answer.

As law firms move further towards performance-based remuneration, the question of what a partner is worth is becoming harder to answer.

Who gets credit for work generated through the firm’s reputation? What is collaboration worth when the financial rewards flow disproportionately to the rainmaker? And how does a partnership explain to one of its own that a colleague deserves twice as much?

These are not merely questions of remuneration. They go to the heart of how firms recognise contribution, distribute influence and decide whose value matters most.

According to the Mahlab Report 2026, traditional lockstep models have largely given way to systems placing greater weight on financial contribution, client origination and profitability. The report also anticipates further widening of the gap between high-performing partners and the median.

Research from Performance Leader and MHPR Advisors paints a similar picture. Their 2026 Equity Partner Contribution and Compensation Survey, drawing on responses from more than 140 professional services firms, found that 81 per cent operated some form of merit-based profit sharing.

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The problem? The partners bringing in the most revenue aren’t necessarily the ones creating the most value.

Who gets the credit?

For all the complexity surrounding partner remuneration, the commercial fundamentals remain difficult to ignore.

A partner who generates profitable work, attracts clients, and builds a sustainable practice will generally command a higher price than one who does not.

However, the relationship between individual performance and individual value is not always as clear as firms might like.

Speaking to Lawyers Weekly, Mahlab managing director Lisa Gazis said profitability and client origination are increasingly important in determining what partners are worth.

“The partners commanding the highest remuneration are those who consistently generate profitable work, own key client relationships, and create opportunities for others across the firm and into the future. They are business builders,” she said.

One partner may bring in a client, another may manage the relationship and several more may be responsible for delivering the work. The firm’s brand, infrastructure and existing relationships can also play a substantial role.

Yet when it comes time to assess individual contributions, those collective efforts must somehow be translated into personal financial rewards.

Performance Leader chief executive Ray D’Cruz said revenue continues to dominate those calculations.

“Supervised revenue still dominates. Our 2026 survey of more than 140 firms asked for the three measures with the biggest impact on a client-facing partner’s profit share. Managed and supervised revenues ranked first and originations ranked second,” he said.

“Profitability measures performed poorly, despite most firms’ focus on profit.”

Factors such as leadership effectiveness, living the firm’s values and contributing to broader business goals are gaining ground, he said, but remain secondary in most remuneration systems.

The distinction between originating a client and developing the relationship is particularly important.

“Firms use a mixture of client and matter origination measures. Client origination can reward ownership rather than growth, so it does little to encourage partners to develop and expand the relationship,” D’Cruz said.

“We’d like to see partners rewarded for developing and executing client relationship plans, with measures that reflect each plan’s objectives.”

A remuneration system can recognise the partner credited with bringing a client through the door without necessarily capturing the contributions of those who keep the relationship growing.

Gazis said the firm’s contribution to an individual partner’s success should not be underestimated.

“Very few partners operate independently of their firm’s brand, infrastructure, firm-wide relationships, and referral network,” she said.

“The partners who attract the biggest premiums are those who can demonstrate that clients buy into them personally, not just the platform behind them. For many partners, the platform is greater than their individual pull and that can impact both their market value and ability to move successfully.”

This creates a potentially awkward distinction between the partner who appears to generate the revenue and the broader network that makes that revenue possible.

It also begs the question: how much of a partner’s success actually belongs to their colleagues?

The $3m illusion

Nowhere is the distinction between individual and institutional value more apparent than in the lateral recruitment market.

Steven Nunn, managing partner at Carlyle Kingswood Global, said firms increasingly look beyond a prospective partner’s headline billings to examine the profitability, sustainability and portability of their practice.

“A partner generating $2 million in fees is not necessarily worth twice as much as someone generating $1 million,” he said.

“The question is how profitable that revenue is, how dependent it is on the individual and whether the receiving firm can support and grow the practice.”

A substantial book of business can make a partner appear indispensable within their existing firm. But the picture may change considerably when another firm asks how much of that business would actually follow them.

“A $3 million practice on paper can look very different when you discover that half the work comes through institutional relationships or referrals from other partners,” Nunn said.

“The most valuable book is not necessarily the largest; it is the one most likely to move, remain profitable and grow.”

If much of that revenue depends on the firm’s reputation, institutional clients and colleagues’ referrals, how much of it should really count towards that partner’s individual remuneration?

A partner may be responsible for managing a lucrative practice without being solely responsible for creating its value. Others may have helped establish the client relationship, generate referrals, or deliver the work.

That does not necessarily mean the partner is overpaid. But it does mean their financial contribution is more complicated than the size of their book suggests.

The price of playing nice

Collaboration is one of the great selling points of a successful partnership.

Firms want partners to share clients, refer work internally, mentor junior lawyers and develop businesses that will continue thriving after individual rainmakers retire.

But what happens when the remuneration system rewards partners most heavily for the revenue attributed to them personally?

D’Cruz said performance-based remuneration can discourage collaboration, particularly when firms focus too heavily on individual results or the profitability of separate practice groups.

“Systems that focus excessively on individual partner contribution or the practice group P&L may discourage client-centric, cross-silo collaboration,” he said.

“But it doesn’t follow that a performance-based system will be worse for collaboration than a tenured or fixed share system. What matters is articulating collaboration as a key contribution area and aligning measures to support it.”

The problem is not necessarily that firms reward performance. It is whether their definition of performance encourages partners to work together or gives them a financial reason to protect their own revenue.

A partner who refers a lucrative matter to a colleague may be acting in the firm’s best interests. Another who invests time developing future leaders may be strengthening the business for years to come.

Neither contribution necessarily generates the same immediately attributable revenue as originating a new client.

The Performance Leader and MHPR Advisors survey suggests firms recognise the problem.

Around 76 per cent of participating firms identified aligning partner contribution measures with firm strategy as a priority for the next 12 to 24 months. Improving incentives for collaboration was also among the leading priorities, selected by 49 per cent.

Gazis said firms are increasingly placing greater value on partners who build sustainable businesses, develop future leaders and create opportunities for others.

“Increasingly, firms are rewarding partners who build sustainable businesses, not simply those who maximise their own billings,” she said.

Recognising those contributions in principle and rewarding them in practice, however, are not necessarily the same thing.

D’Cruz said firms can design remuneration frameworks that appear balanced, only for the final decisions to favour the figures that are easiest to compare.

“A common mistake is to design a balanced partner contribution scorecard and then reach reward decisions on the financials alone, mostly because the data put before the Remuneration Committee is largely financial,” he said.

“Non-financial data needs to be presented in an equally consistent and comparable form.”

A partner who spends years developing talent, strengthening client relationships or bringing work into other practice groups may be creating substantial value for the firm. But if that contribution isn’t captured in the information before the remuneration committee, it may count for little when the profits are divided.

Firms may therefore risk asking partners to behave collectively while paying them to think individually.

When the number becomes an insult

A remuneration decision does more than determine how much a partner takes home. It sends a message about where they stand – and how much the firm believes they are worth.

For those who feel overlooked, that message can sting more than the financial difference itself.

Nunn said partners frequently enter the lateral market feeling underpaid or undervalued, but the underlying frustration is often more complicated than a desire for a larger pay packet.

“A partner might say they want another $100,000, but further discussion can reveal that the real frustration is being excluded from decisions, receiving insufficient investment in their practice or watching less productive colleagues receive similar rewards,” he said.

“For many partners, remuneration is a measure of respect, recognition, influence and standing within the partnership.”

A partner may accept that a colleague generates more revenue. Accepting that the colleague is worth considerably more to the firm is another matter entirely.

The distinction becomes especially difficult when partners contribute in different ways.

One originates work. Another sustains the relationship. Others supervise teams, develop talent, or provide the institutional knowledge that keeps clients coming back.

Not all of those contributions are equally visible on a financial report.

When one partner receives a substantially larger share of the rewards, the others may interpret the decision as a judgement about their importance.

D’Cruz said widening pay disparities were putting greater pressure on firms to explain how those judgements were reached.

“Our 2026 research clearly indicates that firms want better data and evidence and greater objectivity,” he said.

“This is likely driven by increased pay dispersion within partnerships, which puts pressure on those making reward decisions to better justify the outcomes.”

But more data does not necessarily make a remuneration decision fairer.

“There’s no such thing as a purely objective system and overly formulaic systems can have unintended consequences. Even the most seemingly objective data point has a context that needs to be understood,” D’Cruz said.

Remuneration committees must understand what the numbers do – and do not – reveal.

Gazis said remuneration dissatisfaction can reflect broader concerns about recognition, influence, and future opportunities.

“We regularly speak with partners who feel undervalued, but only by testing the market can they truly know,” she said.

“Sometimes another firm will genuinely place a higher value on their practice. In other cases, dissatisfaction reflects broader concerns around recognition, influence, and future opportunity rather than remuneration alone.”

A disagreement over remuneration can quickly become a disagreement over status.

Unlike a dispute about billable hours or profitability, that is considerably harder to resolve with a spreadsheet.

The expensive new arrival

If internal remuneration decisions can create resentment, lateral recruitment has the potential to make those tensions even more pronounced.

Firms competing for high-performing partners may be willing to offer substantial premiums to secure practices that align with their growth strategies.

Nunn said those premiums are often based on future potential rather than historical performance.

“For example, a partner bringing $1 million in portable revenue who can realistically build a $3 million practice may be more attractive than someone with a static $2 million book,” he said.

The commercial logic of attracting a valuable lateral does not necessarily make the decision easy for existing partners to accept.

“Paying significantly above market simply to secure a high-profile lateral can create internal equity problems and unrealistic expectations,” Nunn said.

For those already inside the partnership, a lucrative lateral package can raise an uncomfortable question: why is a newcomer’s potential worth more than an incumbent’s proven contribution?

A long-serving partner may have spent years developing clients, building teams and contributing to the firm’s reputation. A newcomer may arrive with a significantly higher remuneration package based partly on what they are expected to deliver in the future.

Both arrangements may be commercially defensible. But reconciling them within the same partnership can be difficult.

If the new arrival fails to deliver the anticipated growth, the premium may become harder to justify.

The problem is not simply whether the firm has paid too much. It is whether existing partners believe the same standards are being applied to everyone.

How wide is too wide?

The question of what constitutes a fair remuneration gap becomes particularly difficult when the financial differences can run into millions of dollars.

According to the Mahlab Report 2026, equity partner remuneration at top-tier and international firms in Sydney ranges from $800,000 to $7.5 million, with a typical figure of $2 million.

In Melbourne, the equivalent range is $700,000 to $7 million, with a typical figure of $1.7 million.

These are market-wide ranges, rather than the highest and lowest remuneration within individual firms. Nevertheless, they illustrate the scale of financial differentiation across the partnership market.

Mahlab also reported that median partner income growth was flat or modest, while top rainmakers continued to achieve substantial increases.

Its outlook anticipates that the gap between high-performing partners and the median will widen further.

Performance Leader and MHPR Advisors’ 2026 survey provides another perspective.

A third of the participating professional services firms reported a highest-to-lowest equity partner profit-share ratio exceeding 5:1.

The international results were not uniform. Pay disparities were generally narrower among surveyed firms in Australia and New Zealand, with 62 per cent reporting ratios below 3:1.

The findings suggest that firms are becoming more comfortable with substantial differences in what equity partners receive, particularly in larger and more internationally competitive partnerships. However, at what point does rewarding individual performance begin to undermine the very partnership that makes that performance possible?

Firms need flexibility to reward exceptional performers and retain valuable talent. But the larger the gap, the more consequential the judgement about who deserves to be at the top becomes.

For partners further down the remuneration ladder, the question may be less about whether a colleague deserves more and more about whether the difference can be justified.

When the market delivers a reality check

Partners who believe they are worth more than their firm is willing to pay have another option: find out what someone else will offer.

However, testing the market does not always produce the answer they expect.

“Partners sometimes confuse their importance within their existing firm with their commercial value in the external market,” Nunn said.

“A partner may have a substantial practice, a significant title and considerable internal influence, but those attributes do not necessarily translate into portable revenue or equivalent remuneration elsewhere.”

For some, the market may confirm that their firm has undervalued them. For others, it may reveal that much of their apparent commercial value depends on the platform they already occupy.

That can be an uncomfortable discovery for a partner who has spent years believing their remuneration fails to reflect their contribution.

Yet even when a better offer is available, the decision to leave is rarely about money alone.

Nunn said remuneration dissatisfaction frequently reflects broader concerns about leadership, culture, autonomy and strategic direction.

“Money might remove one reason to leave, but it does not necessarily create a compelling reason to stay.”

Once a partner believes they are undervalued, the dispute may become much bigger than the difference between two pay packets.

What is a partner actually worth?

For all the financial metrics, market benchmarks and increasingly sophisticated remuneration systems, determining an individual partner’s value remains an exercise in judgement.

Revenue can be counted. Profitability can be measured. Client origination can be tracked.

But deciding how much credit belongs to the person who wins the work, the colleagues who deliver it and the firm that makes it possible is considerably more complicated.

Leadership, collaboration and mentoring may be essential to a firm’s long-term success, but their value is harder to quantify – and potentially easier to overlook when remuneration decisions are made.

The latest Performance Leader research suggests firms are aware of that difficulty. The challenge is turning broader definitions of contribution into evidence that remuneration committees can use.

D’Cruz said effective decisions require more than a rigid formula.

“Remuneration committees need better data and systems to improve objectivity, while committing to ongoing training to improve their decision making,” he said.

They must assess not only what a partner has earned for the firm, but how that contribution was made, who helped make it possible, and whether the partner is building value that will endure.

The danger is not necessarily that firms reward their highest performers too generously. It is that the measures used to identify those performers may not capture everything the firm claims to value.

Nunn offered perhaps the clearest distinction.

“I think the lateral market is increasingly distinguishing between what a partner earns, what a partner produces and what a partner is actually worth.

“Those are three very different numbers,” he said.

And therein lies the challenge for law firms: deciding which number should determine a partner’s remuneration – and convincing the colleague earning half as much that the calculation is fair.