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Millionaire A&O partners award themselves bonuses while remaining silent on junior lawyer pay rises

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It may well be a grind, but if you can make it to the top of the English solicitors’ profession, a pool of cash awaits

Money

Moves by several City of London law firms to boost trainee and newly-qualified solicitor wage packets have triggered speculation that a salary war is about to break out at that end of the profession.

But Square Mile solicitors were reminded yesterday that the money on offer to junior lawyers looks like peanuts when compared with the dosh being thrown at elite grey hairs. (Although, considering that most top firms adopt the view that lawyers are washed up by the time they hit 50, not that many actually need of a daub of the old Just for Men or L’Oreal.)

Global firm Allen & Overy announced yesterday that it is adding a performance-related bonus pool to its partner remuneration scheme. The firm’s current profit-per-equity partner figure — the average annual drawing a full equity player will take home — rose by 7% last year to an eye-watering £1.12 million.

Now global managing partner — Belgian Joe 90 look-alike Wim Dejonghe — is slipping into his Father Christmas suit and preparing to shower the heavy-hitters with even more cash, depending on their ability to make it rain, of course.

The move comes as the City still awaits an announcement from Allen & Overy on trainee and newly-qualified solicitor pay rises. So far, Slaughter and May and Linklaters have announced significant boosts for junior lawyers, but Clifford Chance and Freshfields Bruckhaus Deringer join A&O in keeping their youngsters on tenterhooks.

According to a report yesterday on The Lawyer website, 90% of A&O partners agreed to add the pool on top of the firm’s lockstep structure. That is the traditional scheme that many English firms use, which effectively rewards equity partners for time served by bunging them guaranteed increases at the beginning of each financial year.

But lockstep systems have faced increasing criticism and pressure — not least as a result of enhanced competition in London from muscular global US firms. The Yanks — somewhat predictably — are bigger believers in rewarding individual performance and are not that keen at all on universal locksteps.

As a result of US firms in London luring big-swinging rainmakers from English rivals on the promise of tasty eat-what-you-kill remuneration packages, modifications to lockstep regimes at City firms have been gaining pace over recent years. A&O’s move is just the latest.

The Lawyer report says that strictly speaking A&O claims it will not be amending its lockstep, but simply adding a “discretionary points pool” for performance-related bonuses.

Some might suggest that once a partner is raking in north of a million quid a year, it’s difficult to see the point of a bonus. But the annual cost of sending the fruits of one’s loins to Eton mount up — the best part of £70,000 a year in fees alone to board two sons, for those interested.

Stateside, the numbers are even bigger. At the beginning of this year, the American Lawyer magazine reported that the elite group of US law firm equity partners wheelbarrowing home more than $10 million (£6.53m) in annual drawings was increasing dramatically.

Indeed, the magazine went on to point out that the top group was opening an ever-wider gap between it and other equity partners. And it’s all a by-product, according to the experts, of law evolving away from a profession and into a business.

One driver of the rocketing top-level drawings, Steven Slutsky, an analyst at PricewaterhouseCoopers told the magazine, is that “law is following the trends that we see in almost every other business”.

All of which means, that while most students doing law degrees and even those on the Legal Practice Course are unlikely even to practise top-flight commercial law, those that do and that claw their way to the top, can still coin it.

11 Comments

Tim

‘Trickle down’ reminds me of the joke brass plaque screwed into the wooden beam at my local, which said: ‘Free Beer tomorrow.’

(6)(0)

Not Amused

Now this site is very much about people at the beginnings of their legal careers, but I do think that it is never to early to learn in law that the man who does the work will never be as important as the man who wins the work.

It simply does not matter how technically able you are. If you do not have a client then you do not make any money.

Now school for most of us, sort of cocoons us away from this truth. We do well in tests so we will get good grades. We get good grades so we will get to a good uni. These connections are formed and you can see why most people come out of school with the belief that if they do well at their jobs then they are entitled to be paid more, or even that they are entitled to a job simply because they are clever. But these are not true.

Being clever does not make you rich. It might give you the tools to be rich, it might actually hinder. But the only thing that will make you rich is learning how to sell.

But employed staff in non sales roles are nothing but a cost. No business actively wants to pay its staff more. If a business is suddenly more successful ands unexpectedly has more cash, then a kind business might give some to employees – but that is unlikely. Salaries only really go up when employers are forced to increase them because of recruitment problems. Now that is why the limited number of TCs is ultimately so good for employees and young lawyers – if you abolished it and had a totally free market , junior lawyer rates would plummet.

But to make money, serious money, you simply cannot be ‘just an employee’. You need to be one of those people who generate clients and ultimately generate money. In law firms these are called partners. In chambers these are called barristers. Life as an associate solicitor is one where you learn the skills necessary to become a partner (or like 90% of the intake, you leave).

If you are going to be a solicitor then I think this is a very important truth that you have to work hard to remember for the first 12 to 14 years. If you are going to be a barrister then fret not – your dwindling bank balance will remind you every day of the need to generate more work.

(14)(1)

Anonymous

The number of trainees is set by law firms – there is no cap which they are subject to. Accordingly, there is no “limit” from the employer’s perspective, they can get as many trainee solicitors as they want and there’s a very big pool of potential trainees. There’s a “limit” from the employee’s perspective so you would expect salaries to be pushed down by this.

The real “limit” is just after qualification when people are qualifying in an expanding legal market – that’s the point in time when employees and young lawyers are in a position to push for higher salaries (as, indirectly, we can see happening right now).

(0)(0)

Anonymous

They are also somewhat limited by the number of quality graduates. I even hear magic circle recruiters, who sift through literally thousands of applications a year, that it is hard even for them to find 80-100 people every year who fit every criteria they are looking for. Obviously there are more decent graduates than TC places, but it’s not as if firms are willing to train people who they don’t think are cut from the right cloth.

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Anonymous

That’s an interesting point – I had thought they would have had their work cut out in simply whittling down the numbers, especially as they probably draw a large chunk of their intakes from their vac schemer students so they might only have to fill about 50 TC spaces.

Perhaps they are up against the problem of recruiting too narrowly? It’s certainly something that lots of people discuss, but I don’t know whether it’s true or not… I’m referring to the “Magic Circle type” sort of argument. I’m not sure if it has merit, or perhaps its something which is less relevant these days?

I only applied to one MC firm, simply because it was the best firm in the UK and I wanted to test myself, but I withdraw from the process before my interview when I received an offer at what I thought was a more “egalitarian” firm. Which actually didn’t turn out to be! Perhaps that was a mistake, but perhaps the Magic Circle, and the elite US firms, suffer from that perception amongst state-educated and non-Oxbridge students?

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Anonymous

“Magic Circle type”

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Anonymous

Your point being?

(2)(0)

Anonymous

Hard even for them to find 80-100 people every year?

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Anonymous

‘magic circle’ type sounds insufferable. Move on and don’t look back. There is no best firm in the UK and the Oxbridge thing is a load of nonsence. Btw it’s withdrew, not I withdraw.

(3)(6)

Anonymous

That was a typo, obviously. I take it you never make any yourself then?

And I wasn’t making the argument that there is a “Magic Circle type”, just that some people make that argument. Hence me saying that “I’m not sure if it has merit, or perhaps its something which is less relevant these days?”

If you read my post more carefully, focusing on substance rather than spelling, you’ll see that I was clearly referring to what I thought when I was applying for TCs.

Obviously, now that I’m an associate at an excellent firm, I’m a little bit wiser.

(5)(3)

Anonymous

Btw it’s nonsense, not nonsence.

(5)(0)

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