We’ve just seen a wave of City law firm pay rises. In the past few weeks, Slaughter and May, Hogan Lovells, Linklaters, Ashurst have all upped their pay for trainees and newly qualified solicitors (NQs) and more are expected to follow. It’s all reminiscent of the heady days of the pre-Lehman 2000s. But what does this mean in 2015?
Some of the rises are pretty striking: Linklaters’ first year trainee pay is up by £3,500 to £41,000, with their NQs enjoying a 5.5% boost to £68,500. Last month transatlantic heavyweight Hogan Lovells announced a £1,500 increase to first year trainee salaries bringing them up to £41,000, and a £5,000 uplift for its NQs, who can now expect to take home £70,000. This follows Slaughter and May’s announcement in April that its trainees can expect an additional £1,000, with NQs bagging £8,000 more, for totals of £41,000 and £70,000 respectively.
Time to break out the champagne?
In the early 2000s, the UK’s elite were troubled little by its, smooth-talking American counterparts. But as the recession peaked in 2010, US firms swept in like eagles to take advantage of crisis-hobbled UK firms, ruthlessly expanding within the City and offering handfuls of cash to top graduates.. The likes of Latham & Watkins, Skadden and Cleary Gottlieb were paying their trainees and NQs sums never before seen in the City, with Bingham McCutchen being the first firm to break through the £100,000 NQ salary barrier.
Today, steadily increasing workloads and better stability mean that the UK’s big and mighty are seizing their chance to play catch up. So does this spell a return to the good times?
We spoke to Clifford Chance’s former managing partner Tony Williams, currently of Jomati – a management consultancy firm specialising in the legal profession. He exercises some caution in his take on the new trend: “To suggest we’re back to boom times might be rather optimistic”.
“In part it’s a bit of jockeying to having frozen [salaries] over a number of years to establish equilibrium and comparability with other firms”, says Mr Williams. “I think a few [firms] have felt they drifted out of line”. But he’s sceptical about whether the increases spell the advent of long-term pay rises: “To suggest we’re going to see compound increases [in pay] year on year might be naïve”. However, when we asked Charlie Keeling, Clyde & Co’s current global HR director, whether the trend was sustainable, he was somewhat more upbeat: “[it is] for a period of time, as long as the economy keeps growing”
So let’s not break out the champagne just yet…
We’re witnessing a collective bout of market referencing; firms responding to years of subtly intensifying pressure, resisting the threat of falling too far behind. For the most part, firms are checking their trainee intakes and opting for quality.. For existing trainees and NQs, with stark pay rises come expectations with added heft. More than simply a virtue, doing your absolute best will be a given.
As for prospective trainees, Mr Keeling suggests the possibility of new opportunities in the coming years with other newly formed organisations that, perhaps, mightn’t be as susceptible to the ups and downs that more traditionally structured firms are: “Different types of law firm will emerge which do not have the normal partnership pyramid structure. They will be lean and mean, more ‘boutique’ by nature, with a small number of partners/owners, a small number of other experienced corporate lawyers and a large flexible workforce of paralegals and non-legally qualified staff”.
Others highlight the huge opportunities that are opening up for London lawyers internationally. Speaking at Legal Cheek's careers debate at Inner Temple on Sunday, Shearman & Sterling partner Mark Soundy predicted that the future was set to be "amazing" for young English lawyers with a global mindset. Soundy, whose firm recently increased its NQ salaries to a whopping £88,000, told the audience:
"If you look at what is going on internationally, with the need for English speaking lawyers and English qualified lawyers, then the next 20-30 years are going to be amazing for you lot.
"If you want to go and join an international law firm on transactional side, even the litigation side, the international opportunities are going to be huge. We are transacting private equity deals in the Middle East, Latin America, Africa and India - and guess what the governing law is? Because everyone sees English law as the high water mark, the quality assurance test."
While the pay rises may not be indicative of a return to good times, the fact that firms are increasing pay at all should be taken as a positive sign. That they’re today in a position to offer enhanced sums demonstrates a facility to remain competitive in a changing market, and the ambition to perhaps one day stand shoulder to shoulder with the US titans.
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