Allen & Overy (A&O) has resisted a wholesale hike in associate salaries, effectively ending the prospect of a salary war at the top of the City’s legal market.
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The move will be viewed as a victory for Clifford Chance (CC), which pre-empted the market by declaring its own associate salary increases of about 15% earlier this month, lower than some initial predictions.
Newly-qualified A&O lawyers will receive around £65,000 and one-year-qualified lawyers £71,500. Two-year-qualified lawyers are now in line for £84,600, with three-year-qualified lawyers set to take home £92,500 per year.
The figures, revealed on legalweek.com (24 April), are slightly ahead of CC, which will pay newly-qualifieds £63,500 with three-year qualifieds on £89,000. Linklaters looks set to pay its newly-qualifieds just under £64,000 and three-year qualifieds £89,000, although it has been waiting for A&O’s decision before making any formal announcement.
A&O is rolling out a new deferred bonus scheme based on performance, under which senior associates can earn up to the value of two equity points. This year transitional arrangements are in place which will also be linked to equity points. The system is expected to result in large bonuses following a bumper year for top
CC London managing partner Jeremy Sandelson told Legal Week: “All firms face similar competitive pressures. As market leaders we were concerned about setting salaries at the right level and allowing the bonus to differentiate.
“The reality is that all magic circle firms appear to be paying much of a muchness, with no one firm significantly behind.”
The rises now look set to be followed by the remaining magic circle firms — Slaughter and May and Freshfields Bruckhaus Deringer — as well as other major City firms including Herbert Smith, Lovells, Ashurst and Norton Rose.
Another partner at a magic circle firm said: “Firms are just businesses and, at any one time need to have an eye on costs — of which people are the largest.”
However, the rises have been met with a cool response by City associates, who believe they deserve a greater share of the profits being generated by the current transactional boom.