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Allen & Overy ups junior lawyer pay by A QUARTER to blow away rest of magic circle

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English firm now paying close to US levels for rookies — but bonuses are slashed

A+O

Global law firm Allen & Overy has issued a robust message to magic circle rivals by giving its junior lawyers pay rises of up to 25%.

Along with being handed their practising certificates, freshly minted solicitors at the £1.23 billion revenue firm will bag salaries of £78,500, an increase of £12,000. Associates in the year above will see salaries rise from £72,500 to £92,000. Those at two years post-qualification experience (PQE) go from £82,500 to £104,500, while three-year PQEers jump from £93,500 to £115,000.

Trainees also get a boost, albeit of much more modest proportions of about 5%. From this September, first-year trainee pay rises from £40,000 to £42,000, while second-year salaries also rise by £2,000 to £47,000.

While the NQ and associate pay rises appear at first glance to shake the City market, A&O’s move is not as straightforward as the firm’s junior lawyers might initially think. Firm managers have stirred the pay pot in a different way, binning the lowest level of the three-tier bonus scheme.

The upshot is that while NQs and other junior lawyers trouser a significant rise to basic pay, fewer associates will be handed bonuses this financial year.

A&O’s global managing partner, Belgian lawyer Wim Dejonghe, attempted to sweeten the pill of shrinking bonuses, commenting:

By adding our standard bonus to base salaries we provide our associates with more certainty as to their pay and more consistent recognition for the work they do every day.

Nonetheless, from the all-important recruitment market perspective of NQ starting rates, the move puts the Spitalfields Market crowd at the top of the English law firm pay table — £8,000 above magic circle competitors Clifford Chance and Slaughter and May.

And the two other magic circle players — Linklaters and Freshfields Bruckhaus Deringer — are left trailing even farther behind, on £68,500 and £67,500, respectively.

The gap between A&O and the rest of the magic circle is even greater at one, two and three PQE level, with the firm paying around £16,000 more than its rivals.

A&O’s dramatic move follows pay rises at transatlantic duo Hogan Lovells and Norton Rose Fulbright. Within the last few days, both transatlantic firms had boosted their NQ pay packets to £70,000.

The magic circle firm’s munificence comes on the heels of release at the beginning of the month of the firm’s latest financial results. Those figures showed turnover had increased by 4%, or £47m.

However, pre-tax profit rose by 7% to £570m; while profit per equity partner — the average amount senior equity individuals lug home in their wheelbarrows every year — also rose by 8% to an eye watering £1.21m.

The magic circle as it stands:

Magic

34 Comments

Moneybags

There will be some very smug future A&O trainees come the September LPC course…

(43)(2)

Future MC trainee

They’ve already started the LPC. Can confirm they’re more smug than you could ever imagine.

(18)(13)

Anonymous

Insane… maybe I should have let that recruiter put my name forward for a role at A&O last month after all!

(17)(12)

Anonymous

Why the dislikes?

Firms don’t have any loyalty to their associates other than agreeing to employ them while the associate is doing good work and contributing financially so why wouldn’t the person above consider jumping to another firm (and a well-respected firm at that) on the basis of money?

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Anonymous

When do you think the corporate world will awake to see what a swizz this all is? Their willingness to fund salaries like this boggles the mind when equally good legal services are available far more cheaply.

(1)(26)

Anonymous

Someone’s bitter.

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Anonymous

I’m not sure how commenting on an apparent market issue demonstrates individual bitterness. I simply observed that the corporate world could get equally good legal services for far less money and are funding grossly inflated salaries. By all means disagree with me, but you infer far too much if you see individual bitterness.

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Anonymous

Your assumption is that cheap legal services are equivalent. Clients are already going to cheaper options for mass produced routine work. The reason the MC/SC and top U.S. firms can charge the fees they do is because frankly they recruit the top people and work them so hard that they are outrageously experienced. To ignore the kind of high end, high value work that they deal with is fairly dishonest. Want a gang of ISDA monkeys? Fine, get it done cheap. Want to create a completely new complex financial instrument? You want the people who have operated for their entire lives at the high end of the City.

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Anonymous

If you are all MC candidates then I am surprised by such inane comments. Only one person attempted to engage in the argument and suggested it was dishonest to say you could get equally good work elsewhere. That’s deluded. I agree with Anonymous’ original comment, there are many people, I am sure, that can do just as good work and far more cheaply. The MC is a self serving cartel that monopolises commercial work to line its own pockets. And the corporate world is fleeced by them believing there is no alternative to the MC. And all is does is hike up salaries which really aren’t justified.

I am genuinely surprised by the personal nature of the comments, not least because my points cannot possibly belie any sense of bitterness and you don’t even know that the individual wants to be a solicitor!

(3)(16)

Anonymous

‘The corporate world’ is not a group of children that need to be nourished and protected – they are sophisticated actors that fully understand the implications of their actions. GCs are coming under pressure to reduce costs and many have transferred their commoditised work away from the MC, which the MC generally has no problem with.

Clients are fully aware of other options. They meet them at panel reviews. Most big corporations have multiple MC and non MC firms on their panels.

It is also amazing that you would think that the MC is some weird cartel given that they are in enormous competition, and that MACFARLANES is now the most profitable firm in London! Incredible, isn’t it? They’ve struggled so hard agains the odds apparently…

And finally, when all of the others outside the MC have the same internationally dominant presence, then you can start moaning that there is some bias. But currently, the MC (and HSF who I would cautiously include given their dominant litigation practice) has:

1. The most lawyers.
2. The ‘best’ lawyers (admittedly lose many to the US).
3. Extremely broad international offering (except S&M who are arguably slowly declining).
4. The most experience.
5. The highest reliability in terms of past success.

Now many other firms are excellent. I would be perfectly happy at Pinsent, Olswang, Eversheds, KWM, B&B, and all sorts of other great firms. But they are different offerings, doing work for slightly less demanding clients and they are superb at doing it and they make a lot of money. You are ridiculous if you ignore Ashurst, for instance, in making your assertion that all the good corporate work goes to the MC.

The reason that you/the above commenter seem bitter is because your ‘points’ are ridiculous. So one naturally considers why you are making them.

(21)(1)

Anonymous

True, but who ever got fired for using a leading City law firm?

(11)(0)

Anonymous

That’s the point, you are quite right. Use of the MC is driven by nothing more than fear of the consequences if litigation goes wrong. It rarely involves objective assessment of actually who could provide the best legal services.

(1)(15)

Anonymous

Someone’s apps got rejected by the MC..

(25)(0)

Macs pep

McF pep is high because half of its partners aren’t even real partners and are no equity. Their Pep figure has to be taken with a big pinch of salt. The real partner take home pay will be around half that. Unlike Freshfields for instance which is all equity.

(7)(2)

Non-Oxbridge Pleb

Well done to A&O – the rest of us will be eyeing them up jealously. But I have to ask whether this sort of thing is sustainable. US firms were always able to hand out massive salaries because they are much smaller and staff their deals/cases with fewer people. Will A&O be taking on fewer NQs and upping hours? Is this a massive salary inflation that precedes a slump in the market? Does it simply recognise a seller’s market in terms of junior associates, given the lower numbers trained during the crisis? Is it simply salaries correcting themselves after the crisis? Or does it actually mean nothing because of the lower bonuses?

I’d love to hear from anyone with some insight into this decision. I want to know whether associates at other firms should be grabbing the pitch forks.

(32)(0)

Faneuil

If I am to add my two cents, I think it will likely be a combination of all above.

The higher the remuneration is, the more work is generally expected. Now for some reason, most of my A&O contacts always claimed their firm was the most “humane” of all the MC in terms of work-life balance, expectations of performance and so on. With such an increase in salaries, one can expect the partners will wish to extract more blood out of their associates in return and the W/L balance will suffer accordingly.

Similarly, the increase is reported to mirror wishes of staff re bonuses, so that they are paid into the base salary instead. This likely means that any bonus payable will only be bestowed on the most hardcore of workers in the firm, while most will have theirs either completely cut or severely reduced. It remains to be answered how high were they to start with.

Nevertheless, I don’t think this marks a ‘Americanisation’ of the City legal market outside of US firms, but just reflects on the need to keep pace with its rivals in the MC. Interesting times are ahead, especially if other firms will use this A&O method to cut bonuses and reflect them in their salary increases. For those of us who are not in the MC, let’s hope that this rising tide will raise all the other boats.

(16)(0)

Not Amused

Personally I think it is market correction for the lack of increase during the years since 2008. What is interesting is that A&O have chosen to do it now. I think most conservative people would have waited another year – but perhaps that is their brilliance. If the market was going to make you do it anyway in a year’s time, then why not do it now and get massive applause/attention.

The others will now all have to meekly follow suit.

(20)(1)

Anonymous

But if bonuses are included in that NQ sum, doesn’t that mean that NQs at other MC firms will be paid a similar amount with bonus?

(6)(0)

Anonymous

A lot of law firms still don’t quite understand bonuses. In finance particularly, bonuses are incentives for hard but achievable goals – they will persuade you to do a few extra hours each week. In a lot of firms, the targets for getting a big bonus are absolutely mad so people just don’t bother trying, and the small bonuses are nothing worth writing home about.

Law has never been based on enormous bonuses and I don’t think it should be – far more civilised to have consistently well paid associates who are comfortable in the money they earn and who aren’t scrabbling around for bonuses. Flat, high, salaries also tend to promote a more collegiate attitude as people don’t feel the need to get a bigger bonus than their colleagues.

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Anonymous

Such a good move, considering how reliant bonuses are on hours, which in turn are reliant on obtaining sufficient work from partners, which in turn is reliant on your department’s level of new instructions, all of which are largely out of a junior associate’s hands.

(19)(0)

Anonymous 2

As a trainee at another MC firm, I can say that I definitely am jealous of A&O at the minute. The money they’re offering is well above the rest of us and hopefully will be something, by the time I qualify, that all of the MC are matching.

(13)(0)

Anonymous

Will provide two chief benefits for associates:

1) Will help people applying for a mortgage; and
2) Ups their pension contributions.

No doubt the associates will have to work harder than ever to justify their base salary raise, but the certainty it brings can only be an overall net positive.

Hopefully other firms follow suit – I don’t think a ‘bonus culture’ is particularly helpful for law firms. The problem stems from the fact that law firms only profit from the amount the time one spends on a matter for their client. Time really does equal money in this profession. A bonuses encourage associates to be profligate with their clients’ work; why do something in an hour when you can amble through in two?

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anonymiss

Jesus wept..even the trainees salaries are higher than what a lot of way more qualified solicitors in the north west are on…and before the haters start I realise these are corporate salaries, London is the centre of the universe etc…but still…I’m not convinced they work any harder….

(1)(10)

Anonymous

‘Oondred pound a week. Eeeh that’d be reet gradely!

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Not Amused

Capitalism isn’t about rewarding hard work for the sake of it.

A beef farmer and a sheep farmer both work really hard. But beef can command a higher price so the beef farmer earns more. Even in the North West you have cleaners. You will note (eventually) that they work just as hard as you do. They aren’t paid as much.

The UK would be a lot happier if it could understand farming. The ‘soil’ of the SE (i.e. the industry, the environment, the client base) is just more fertile. So come South, plant and earn profit. Don’t sit on a rocky outcrop and bitch about how much more than you the guy in the fertile valley can grow.

(9)(2)

MrShineHimDiamond

capitalism isn’t really about rewarding hard work at all. It’s about making money (whatever the human cost). That was a lot of words to not say very much. The ‘fertile’ south has more money being paid to people who pay most of that on housing and transport – why bother extolling the virtues of that?

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Kamal

You rightly add that the increased cost of living in London makes the increased salaries there more deserved.

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anonymiss

you know you’ve made it when ‘not amused’ replies to one of your comments…actually my office is unusual as the cleaners do very little cleaning (not sure how they get away with it really) and as far as i’m aware none of them got into huge debt paying uni fee or lpc fees..they also seem a lot more chilled out and relaxed than the lawyers slaving around them, but hey ho, i’m a sheep farmer from up north, what do i know!

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Not Amused

I quite like my farming analogy – thank you for running with it. It’s not quite perfect, because if the SE was soil then most people would be excluded from the wealth unless they owned or inherited wealth. Luckily the fertility of the SE can be enjoyed by all.

I come from a place where there aren’t jobs, so I moved to the SE. Arguably one of the causes of the SNP is that every sensible Scot did what I did and moved to the SE. Without enough sensible people left … but I digress.

Either be glad that you got to live where you wanted (I had no such option with my homeland) or move down south if you want more riches. Oh, and please be nicer to your cleaners.

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Anonymous

Good Lord NA, are you a Scotsman?

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anonymiss

my original comment was solely related to MC trainee wages and the fact that they are so high, when from what i’ve heard (at the farmer’s market) they don’t do much apart from photocopying etc…..oh and please refrain from patronising me about cleaners, I’m nice to everyone I work with regardless of what they do, however, i only respect those that work hard.

(0)(1)

Not Amused

Well I want every junior lawyers’ wages to be higher. Gotta start at the top if that’s gonna happen.

I chided you for counter productive envy. But it was only a chide.

(0)(0)

Quo Vadis

Nae Amused

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anonymiss

Nowt like a good chiding from Not Amused on a wednesday…he’s like the scottish Mr Gray…

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