Investment banks hike legal pay after bonus cuts

Several major investment banks have raised in-house legal salaries to offset falls in the amounts of bonuses being paid out.

Research by recruitment agency Sheffield Haworth reveals that UBS, Morgan Stanley and Goldman Sachs have all increased wages for their internal legal personnel, with the bulk of the rises occurring at more senior levels.

While the salary increases do not completely make up for the drop in amounts paid out through bonuses - which have fallen by around 50% - they represent significant rises in some cases, with senior in-house banking lawyers receiving pay hikes of up to 20%.

The changes took place in February, pre-empting recommendations made in the Turner Review - published in March - about reducing the available portion of variable compensation at investment banks.

Andrew Williams, general counsel at UBS, commented: "We go through an annual compensation process where we review salaries, and this one has obviously been linked to the Turner Review and the accompanying Financial Services Authority paper on a regulatory response to the global banking crisis."

Meanwhile, Bank of America (BoA) and Merrill Lynch are consolidating their pay packages in the wake of their union last year. At present, Merrill has lower base salaries and higher bonus figures than BoA, but front office managing directors in the combined entity are being brought up to the BoA levels, which are 50% higher than Merrill. It is still undecided whether the increases should apply to non revenue generating positions such as legal.

Commenting on the changes, Shami Iqbal, executive director of legal and compliance recruitment at Sheffield Haworth, said: "With continued pressure on pay levels in investment banks, and pressure to match amounts paid by law firms, it will be fascinating to see how the ratio between salary and bonuses continues to play out."