Career Clinic: How do City firms get away with paying £30k less than US rivals?

They’re comping you for committing career suicide. The deal is you take the money now in return for the crap shot at partnership. Your chances of making partner are pretty crap with City firms but they’re even more crap with American firms. Simples.

Hmmm -02 Jun 2010 | 14:22

Because people are idiots

If you are choosing between Latham or Sidley or Cleary etc. and the magic circle, the quality of work and clients will be the same. Train at the magic circle and then leave at 1 or 2 years PQE. Earn some real money until you are about 5PQE and then decide if you want to make partner (and many people decide they don't). If you do want to, I'm not sure your chances are that much better in the magic circle.

Bored Associate -02 Jun 2010 | 14:58

I really think this issue will come to a head in the near future, as associates in magic circle/other top UK firms wise up to the fact that partnership chances are becoming negligible across the board.

The pay disparity is now significantly larger than even about five years ago when it was more of a 'mid-Atlantic' rate offered by the US firms in London. If you are in a transactional department I really can't imagine the hours at a US firm are significantly greater than those required at the magic circle. Why should you slog away for eight or so years at a Freshfields or a Linklaters only to miss partnership and get 70% of the pay which your mate at Skadden got for the same thing?

I know I'm thinking about it.

Blue Horseshoe Loves Anacott Steel -02 Jun 2010 | 16:40

I think the £30k figure is measured at the widest point - the disparity in average NQ rates is probably closer to £20k. In general, US firms pay higher basic but don't contribute as much (if at all) to other benefits e.g. a pension. There is a perception that hours and partnership prospects are worse at US firms, but from what I've seen I'm not so sure.

US associate -02 Jun 2010 | 16:54

Look at total comp, but don't believe the B.S. from either side

In short, mostly through a mix of fear and reputation. But what good is a stellar name on your CV if you never put it out to market?

To get into the detail for a bit, part of the answer may be total comp.

Some US firms do not offer pension contributions, etc. It's likely that a MC firm will have some internal propaganda telling you exactly what your total comp is, as (a) it helps in the mission to stop you leaving to the US mob; and (b) (i) your continued contribution to the occupational pension scheme helps mitigate against the need for the partnership to top it up; and (ii) the onsite doctor helps you just keep on working.

Some folks prefer the money up front, and to decide what to do with it themselves and US would likely suit them better. Query your tax position at all times though.

That said, be cautious about the B.S. from both sides. UK firms tend to badmouth the US ones with varying degrees of subtlety (you'll work harder, you'll have no chance of partnership (e.g. see nonsense comment at post 1 - if you are competent, have a cracking client base and pay your way, you can make partner anywhere if you kiss enough a), you'll not get the high class training because their photocopiers are much less comfy to bend/be bent over, and so on).

US firms as the second poster intimates are a mixed bag. Some are as good as a UK firm, some are not. Some bench your pay against a USD rate, so your salary can be subject to FX vagaries. This can work in your favour though.

I think it is fair comment though to suggest there is a bit more of a meritocracy (to use a nice word) or eat-what-you-kill NY nutter environment (if you prefer) in the US. So if you're a plodding dullard who pads (sorry, forms considered opinions), then you're better off in a UK practice. And no, not everyone in a UK practice is like that before they get grumpy, but some are, including in the MC partnership ranks.

Arguably, the eat-what-you-kill in the US can lend itself to higher rewards for associates who prove themselves. E.g. higher salary and bonuses for those who put in crippling hours, but a faster "kindly F off now" for those that coast.

My advice to you though would be to pick an environment that suits you, and pays you the most for the least work whilst looking the best on your CV (sorry, I mean, giving the best training and deal opportunities). Preferably with the least amount of t0ssers in your immediate vicinity.

The partners will serve their own interests ultimately (and rightly so), see mass redundancies of yesteryear, so you should pay heed to your own interests rather than loyally plodding on without thinking about your wider career. Don't rule out moving around a bit in your career, a long slog from trainee to associate to partnership at the same MC firm is increasingly rare.

I'm pro alternative career paths personally, e.g. go US for a bit, pick some cash up, or go in-house at 2PQE or so and rediscover your evenings (do not believe the lies about in-house always paying less by the way). You can always come back into private practice again with a greater understanding of your clients.

Or you may see the light... yep, you guessed it, I'm a client, so not in either camp on this debate...

Stupot -02 Jun 2010 | 17:02

to Stupot

"My advice to you though would be to pick an environment that suits you, and pays you the most for the least work whilst looking the best on your CV (sorry, I mean, giving the best training and deal opportunities)". - You made my day, pal!

Seriously, what Stupot wrote here is 100% right. And wise.

V -03 Jun 2010 | 12:10

More questions

Thanks for all of your comments - definitely some interesting views.

I'd love to hear the views of some magic circle associates as to what their thought process is regarding this matter.

Also, how difficult is it to move after qualification to US firms from magic circle firms? I'm guessing it depends on the practice area - if thats the case, then would it help qualifying into a generic department for instance, corporate or banking, as opposed to something niche like private equity.

Thanks in advance.

OP -03 Jun 2010 | 23:37

I'm in the MC and have seen a number of colleagues leave for US firms after the 2 PQE threshold. Moving before then may be slightly more difficult, particularly at the moment as there aren't many NQ jobs out there, but at 2PQE with magic cirle training and some social skills, so you come across as someone your interviewer would willingly share an office with, you should find it easy enough to move to a US firm. In relation to your question about departments, anything transactional is a safe bet, including a specialism like private equity within a corporate department.

Bored Associate -04 Jun 2010 | 10:30

The magic circle get away with it the same way the large national players get away with paying their regional associates £30k less than associates at the same level who are in London.

Anonymous -04 Jun 2010 | 11:54

There are a few reasons you get paid more at US firms:

Hours - notoriously horrendous compared to UK firms. Definitely not true these days if you're comparing your hours to a corporate/finance department in a magic circle firm. Bored Associate points out, the big players in the US market are the guys on the other side of your deal and they're doing the same hours you are. They're just being paid a lot more.

Culture - the hire & fire culture of US firms was very much set against the softly softly approach of the UK firms who traditionally have tended to look after their own. The credit crunch cuts put an end to people believing there was any real difference between the two.

Partnership - traditionally it was true that you were far more likely to make partner in a UK firm than a US firm and once you made it you were set for life. These days, having talked to people at both, it doesn't seem that it's any more easy in the UK firms and equity partners in magic circle firms are also now managed out where they're not bringing in the bucks.

Supervision - as a junior in a magic circle firm there are a lot of people between you and the client and a good buffer to keep you in check with what you're doing. US firms tend to have smaller deal teams but speaking to associates they're happy that there are good open door policies and they get the support they need while getting experience. The downside in the magic circle is that the decent work might not filter through for a good few years PQE.

Clients - generally magic circle firms have the hold on UK PLCs. US firms are newer in the market and some of the smaller firms operate as a support function for their New York/Washington parents. That said, the big players have been here a long time now and have established themselves with key contacts in the UK and European markets which means they are getting roles on the same deals as the magic circle.

Training - The magic circle has excellent training and you're unlikely to find a US firm to rival that as a trainee. That said, US firms are more aware of the need for structured training programmes and have shown willing in the last few years to move towards the magic circle structure of training.

In terms of whether it's easy to move PQE, I agree with Bored Associate: it's hard to move straight after qualification but that is true of a move to any private practice in London in the current market as lots aren't keeping their own trainees on so have no business case for lateral hires. That said, there are opportunities out there and people are making the move earlier than two years PQE.

You are probably correct that it is technically easier to move if you are qualified in corporate/banking/capital markets as the big US players tend to have those departments set up. It might be harder as, for example, an employment lawyer from the magic circle as you're going to have less choice. But Stupot is right that you're best to just work where you like and you should do the work you like. £30K more a year isn't going to make you happy as a banking lawyer when your real interest lies in environmental law. You should base your decisions on your interests.

Finally, you need pretty good reasons for moving. "I want more cash" isn't going to wash.

MC Associate -04 Jun 2010 | 12:46

Just on the question of trainee training: there's nothing worth the name at any firm. Why should there be? The law is there to learn if you want to know the law. The deal documents and practitioner commentaries are there to read if you want be commercially aware. Beyond that, a trainee would do well to start thinking for himself or herself as early as possible. I don't think I've ever been to a training session at any level that I couldn't have done in half the time with the right book or article.

The obsession with training quality reflects two things, I think. First, the fact that City law continues to attract graduates who have yet to begin thinking for themselves or appreciate that this is what being good at any job requires. Secondly, the erroneous assumption that once in paid employment someone will always be there in the role of teacher to look after you and provide patient tuition and the right answers.

Wake up, there's coffee brewing.

HGR -05 Jun 2010 | 11:10

Not true

I decided to jump after three years PQE (two years too long) at a magic circle firm, because quite frankly, the hogwash fed about better quality work simply does not ring true.

I have seen both ends of the spectrum - senior associates who have no client contact and whose emails always need approval from the partners, a plethora of associates coasting along bored with the work but with a 'can't be arsed to move' attitude. I even had one tell me that she could not IMAGINE working anywhere else. Whether this was an episode of severe bottom-licking I do not know but I have also seen associates burnt out and placed on reduced hours, I have witnessed a manic go-go-go culture within a magic circle firm.

I am now at a US firm and I can say that I do not believe the hype of better training because it takes eons in the magic circle to get great work unless you are working for an old school partner who knows that you have to learn by doing, not by having a gazillion people read through your draft emails.

US firms and smaller firms give a richer diet of work and yes, I said it, you become a better lawyer. Often, the departments are not overstaffed meaning that yes, you work hard, but you manage to get your teeth into meatier stuff, sooner. It is an absolute no-brainer to me. Get paid more, get better work.

anon -07 Jun 2010 | 17:01

downsides of US firms

Anon - thanks for your post. Can you give some colour on what you felt were the downsides of going to a US firm?

james -07 Jun 2010 | 22:50

One point to remember is that you are comparing the HQ of a top MC firm to an outpost of a top US firm i.e. it is not like for like.

The partners in the London offices at US firms are a rag-tag bunch - some superstars poached from MC firms (but without the support (or clients) they had there), some ex-stars looking for a final pay day (think Beckham to LA Galaxy/Lineker to Japan) and a few random US guys. Associates are even worse - Latham in particular is a refugee camp for trainees who don't get kept on at Freshies/A&O/Links. And when you deal with them - Sidley in particular take a bow here - you are under no illusions that they are comparable to MC lawyers on the other side of the table.

I'm sure there are exceptions to the above but if you are a good junior lawyer (or want to be one) it does not seem worth the risk to move from an established MC practice to an outpost serving the needs of US clients only.

The above is the reason I didn't move there (and I am no lover of MC work culture I can tell you) anyway. And despite the impression from the legal press, there are extremely few MC lawyers willing to make the move even for an extra £30k. And fewer still who would be considered stars at their current firms.

ExMC -14 Jun 2010 | 10:21