As a newly qualified lawyer in London at a top city or US firm the amount you are earning is significantly higher than it would have been only a few short years ago. The US firm’s entry into the London market and their willingness to offer pay parity with New York coupled with the frankly terrible GBP to USD exchange rate in recent years has led to bumper pay days for those associates at the top US firms and started a war for top talent.
The magic circle, keen not to be left out decided this year that they were tired of losing some of the best of the Oxbridge crop to US firms over money and decided to close the gap, starting lawyers on £100,000 or more as soon as they qualify. When Bingham McCutchen first broke through the £100K barrier for NQs in around 2012/13 they were trailblazers, how was it economically viable for them?! many laughed at the prospect of junior lawyers being paid so handsomely. Things didn’t turn out so well for Bingham but no one is laughing anymore as the pay packet is now the standard for associates at top tier firms.
The impact of rising pay at top firms has been to lift law firm market compensation up as a whole, silver circle wants to compete with magic circle and city firms with the silver circle, all raised base salaries to keep up with the Joneses. While all these pay rises are great news for junior associates across the spectrum do they have wider implications for the in house legal market?
Most elite companies in London want lawyers to have started their career at a law firm before moving in house; not just any firm but usually a top 50, some clients will only take lawyers that trained at a magic circle or top US firm into their ranks.
If pay has been indisputably rising at law firms what does this mean for in house clients that want to secure the best legal talent? The natural conclusion is that they need to pay more than before to get them, the most elite institutions don’t like asking lawyers to take a substantial pay cut when they move in house. They usually offer near parity to law firm pay as a base salary, in some instances there is the potential to make a lot more in bonus working fewer and far more regular hours. A great deal if partnership isn’t something you aspire to with the best paying industries continuing to increase pay to align more closely with feeder law firms.
If the top of the in-house market is upping its game to get the best lawyers from private practice into their ranks what does this mean for everyone else? Will it spark a pay war similar to that witnessed at the law firms?
The key difference between the law firm pay war and in house is that the in-house market is much more fractured and distinct. There are massive differences between pay at for example a financial services provider and a retail client. You could in theory be practicing the same area of law at both and come from the same firm but the pay on offer would be dramatically different.
The rising top of the market therefore is unlikely to drag in house lawyers pay as a whole up across all sectors, with those less well-paying sectors accepting candidates from “lesser” firms.
Pay rises at law firms and some in house clients to a large extent belie wider uncertainty in the market. Will the bubble continue to grow and burst? Pay wars can have fantastic short-term consequences but are certainly not something to hope for if you value stable and consistent market growth over the longer term.
Author: Ken Collins is a legal and compliance search partner with Greenway Collins covering the EMEA region.