A dearth of three to five-year qualified deal-making and corporate specialists is driving up salaries for younger solicitors, as pay freezes that blighted the City during the economic crisis begin to thaw.
But London legal sector recruitment specialists told Legal Cheek today that the top firms are increasingly moving away from straight-jacketed remuneration systems that rely on lock-step concepts of time served.
Newly qualified solicitors specialising in commercial real estate, banking and financial services, funds and regulation are currently tipped as attracting the biggest pay packets.
Those recruitment consultant comments come just days after magic circle firm Freshfields Bruckhaus Deringer announced it was lifting a five-year pay freeze and boosting some newly qualified salaries for 2014-15 to £77,500.
The poor young dears at the Anglo-German giant had been struggling during the financial crisis on starting salaries of no more than £72,500. But the increase puts them well above their magic circle counterparts.
Indeed, management committee munificence at Freshfields follows a salary spending spree as City partnerships attempt to hang on to younger associates in a recovering market.
According to The Lawyer magazine, magic circle rivals Linklaters has also chucked more cash at its newly qualified solicitors for next year, but only by what some might see as a paltry increase of £1,000, up to £65,000.
Old-school tie merchants, Slaughter and May, have been slightly more generous, but not by much, increasing NQ pay by £2,000 to keep pace with Links at £65,000.
“Salary freezes in the City are definitely thawing,” comments Iain Millard, manager at the London office of legal profession recruitment agency Chadwick Nott.
But he goes on to argue that newly qualified remuneration is more complicated than it was:
“A while ago, a number of firms looked to review their remuneration systems with the aim of moving away from the traditional system of applying prescriptive salary bands. They are moving to more merit-based systems with a bonus element playing a more important role.”
Which raises the crucial question: how is merit measured? Sarah Coughtrie, a director at the London branch of legal recruitment specialist agency Laurence Simons explains that “some firms have a very complicated matrix, involving billing, business development and client skills”. She pauses before reiterating that “fees billed is very important”.
According to Coughtrie:
“The key point is that firms want more flexibility and financial muscle when competing with rivals for the best candidates – both in terms of retention and lateral recruitment. We have seen a lot of aggressive counter-offering recently.”
However, firms have to be increasingly discreet about their pay bands and policies. One of the trickiest issues internally is paying newly-qualified associates more in some practice areas than those specialising in other fields.
The problem, says Millard, was that during the downturn: “the conveyor belt of newly qualified lawyers almost stopped running. Training contracts were deferred. So now firms will have to be more creative about remuneration and move to a merit-based system that rewards individuals appropriately”.
Laurence Simons research published at the end of February showed that the average City solicitor pay packet rose in 2013 by about £5,000 to nearly £109,000. Nonetheless, according to the research, bonuses actually fell over the same period from 34 per cent of salary to 29 per cent.