Allen & Overy boosts associate pay to £81,000

Allen & Overy (A&O) has boosted base pay for newly qualified (NQ) associates from £78,500 to £81,000, following a successful year for the firm.

The 3% increase, which took effect from September, comes alongside a 5% rise in pay for first-year trainees to £44,000 and a 4% increase in second-year trainee pay to £49,000. A&O declined to provide a figure for pay including bonus.

The increase at NQ rate puts the firm in line with Linklaters, which earlier this year confirmed a £1,000 increase for NQ lawyers to a base rate of £81,000, rising to up to about £90,000 including performance-related bonus.

It is ahead of Slaughter and May, which froze its pay bands at a new rate introduced in January this year that sees NQs receive £78,000 before bonus.

It emerged last week that fellow magic circle firm Clifford Chance has increased total compensation (including bonus) on offer for NQs by just under 3%, putting the most junior associates on £87,300, compared with £85,000 last year.

Freshfields Bruckhaus Deringer meanwhile froze its bands this year, after last year hiking base pay for newly qualified (NQ) lawyers by 26% to £85,000, rising to £97,000 for top performers.

A&O last reported its associate pay scale in 2015, when it chose to reduce bonus levels for junior associates in preference of substantial hikes in its base-rate pay.

Earlier this year, the firm posted double-digit growth across all key metrics after a standout year in which revenue and profit per equity partner (PEP) rose to record levels.

The firm added more than £200m to its top line during 2016-17, with revenue rising 16% to £1.52bn. PEP rose even more sharply, shooting up by 26% to reach £1.51m.

On a constant currency basis, stripping out the gains from exchange rate fluctuations, A&O said revenue had grown 6% on last year, with PEP up 14%.

Managing partner Andrew Ballheimer said: “These are strong results, achieved against a challenging backdrop of political and economic uncertainty. While these results include one-off foreign exchange rate gains, this does not detract from the real underlying growth we have seen.”

The sharp hike in PEP was particularly notable as it moved A&O within touching distance of both Freshfields Bruckhaus Deringer and Linklaters, both of which have typically boasted significantly higher PEP than A&O and fellow magic circle firm Clifford Chance.