Associate pay reaches eye-watering heights as the war for talent at the top of the market goes further into the salary stratosphere
With all eyes on the upcoming election to see what a potential new government might do about the cost of living crisis, this May saw things get a little easier for the notoriously hard-done-by Magic Circle associate demographic, as their salaries reached new heights.
Freshfields Bruckhaus Deringer fired the starting gun on a new pay race at the beginning of the month, increasing newly-qualified (NQ) rates from the previous benchmark of £125,000 to £150,000.
Trainee pay was also bumped up, with first-year rates rising from £50,000 to £56,000 and second-year salaries up from £55,000 to £61,000.
In a statement announcing the increases, London managing partner Mark Sansom said the firm was ‘committed to embedding a culture that supports our people to deliver their best, knowing their contribution is valued and rewarded’.
‘This move follows a year of strong growth for the London business,’ he added, while also citing ‘the success of the material investments in the US’, where the firm has made big strides in recent years with a bold series of lateral hires.
That hike piled the pressure on the rest of the Magic Circle to follow suit, particularly considering the competitive pay packages on offer at their US counterparts, such as Quinn Emanuel, where NQs are now paid £180,000.
And sure enough, Clifford Chance, Linklaters and A&O Shearman joined the party at the end of the month matching Freshfields’ £150,000 hike, leaving Slaughter and May the sole Magic Circle firm still on the lower rate of £125,000.
Linklaters firmwide managing partner Paul Lewis said the firm was ‘committed to rewarding our people competitively’, and that the salary changes would ‘enable us to attract and retain exceptional lawyers to provide the highest quality service to our clients’.
A&O Shearman’s statement, meanwhile, quoted new London managing partner Denise Gibson, who said that the compensation structure gives the newly merged firm ‘flexibility to reward expertise, performance and wider contribution’ and that it was ‘designed to be highly competitive to reflect the markets in which we operate.’
That move also means that legacy Shearman lawyers at the now-merged firm will avoid a situation in which the tie-up would have seen their pay decrease as a result of the deal. It had been reported earlier this year that A&O Shearman would stick with the legacy A&O NQ salary of £125,000, rather than matching Shearman’s £145,000, but the new rates mean £150,000 is now the benchmark for all.
‘The compensation structure is designed to be highly competitive to reflect the markets in which we operate.’ Denise Gibson, A&O Shearman
While this is of course good news for London associates, some market-watchers are warning that this latest round of pay hikes will raise concerns among mid to senior-level lawyers.
Speaking to Legal Business, David von Dadelszen, director at James Legal, said: ‘This is a slightly alarming continuing trend that isn’t [reflective] of increasing salaries for more senior lawyers where it may create retention issues. Clients must question getting advice from junior lawyers who are paid so highly.’
In a similar vein, Hannah Benger, business manager at Montresor Legal told LB: ‘Magic Circle salaries usually level out at the mid to senior level, which may create some issues, particularly given the consistent increases at leading US firms.’
The increases are likely to pile the pressure on other London firms to up salaries. Slaughter and May last raised NQ salaries in November, with no further increase after its most recently six-monthly pay review in April.
This pressure is exacerbated by the fact that many US firms continue to offer pay packets still more generous than even the increased Magic Circle rates. In Benger’s words: ‘The client base of Magic Circle firms is different to US firm clients who are used to paying a lot more.’
With NQ bonuses to be paid out in the coming months, Benger added: ‘It will be interesting to see what the Magic Circle firms do with bonuses. It is coming up to bonus season, and there is likely to be renewed interest in making a move to premium US firms if Magic Circle firms cannot compete with Cravath bonuses.’
Legal Business