Dollar-pegged NQ pay packets at elite US firms swell to around £200,000 as pound plunges to record low
UK mini-budget tax cuts causes pound to tank
Lucky newly-qualified (NQ) lawyers working at some US-headquartered firms’ London offices are seeing salary hikes to around £200,000 as the pound hits a record low dollar valuation.
The devaluation of the British pound against the US dollar will affect those working for firms who base their pay on the dollar amount. These firms take two approaches to currency conversions for salaried employees: either they follow the live rate or decide a spot rate that fixes the exchange rate for a certain period of time.
The Cravath Scale, which is used as a benchmark for lawyers’ pay at US firms, puts NQ pay at $215,000, equivalent to over £198,000 at the time of writing — a hefty uplift of £21,000 on the £177,000 conversion figure from last month.
US Cravath payscale at current conversion rate (£0.92:$1)
|Class year||Cravath scale||Converted to GBP|
Figures have been rounded
This is the latest money bonanza for lawyers to come from the Chancellor Kwasi Kwarteng’s mini-budget that will reverse the planned rises in National Insurance and cut the top rate of tax for those earning over £150,000 from 45% to 40% from April 2023.
The tax cuts will have the greatest impact on City partners. Slaughter and May equity partners are expected to save around £178k on their tax bills, whilst Macfarlanes and Magic Circle equity partners enjoy tax breaks to the tune of over £100,000.
Firms with equity partner tax savings of >£100,000 from April 2023
|1||Slaughter and May||£2.96 million (estimated)||£178,000|
|3||Freshfields Bruckhaus Deringer||£2.07 million||£122,500|
|4||Clifford Chance||£2.04 million||£120,500|
|5||Allen & Overy||£1.95 million||£115,000|
|7||Hogan Lovells||£1.8 million||£106,000|
Figures have been rounded
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Cap and collar
Daily Mail tier journalism. No US firm pegs or has ever pegged salaries to the dollar in the way this article is implying. No wonder you neglected to actually name a single firm that is now paying anyway near 200k as a result of the exchange rate.
At least you’ll get the clicks you want.
Also, how have they calculated these partner tax cuts? To me it looks like at least one error is that they’ve assumed the additional tax rate previously applied to the full PEP rather than just everything over £150k.
Can’t wait for follow up articles for every other x% movement of the £:$, even where no US firm has actually updated salaries.
Nope it correct when you add the 5% over £150k and without the 1.25% NI. Why do they say lawyers cant do maths?
Cap and collar redux
Not for associates’ annual salary, and therefore agree article is misleading. Some US firms do pay at spot (or close to it, such as a monthly fix) for partners, and/or for associate bonuses, in London.
STB (elective), Akin etc…
Akin conversion rate due to change in October
Rubbish – every firm collars at an FX rate well above (or below, depending on your viewpoint!) the current one.
STB definitely don’t – associates there have an option to elect to receive pay in USD.
We fix on the fx rate of close of first business day of each quarter. 3rd of Oct is our next fix. Mad how folk profess they know how every single US firm in the City do it.