Following a record financial year that has seen Allen & Overy (A&O) move ahead of Magic Circle rivals Linklaters and Freshfields Bruckhaus Deringer in turnover, the firm’s associates will see a £20,000 increase in their base salaries as the firm incorporates bonuses into the annual pay packet.
The pay hike follows the firm’s review of its London associate salaries against market data and having consulted with its partnership and associates on how to reward more competitively.
The inclusion of bonuses sees a steep rise in newly qualified (NQ) associates base pay with them receiving £12,000 more at £78,500. One year post-qualification experience (PQE) associates will see wages increase from £72,500 to £92,000; two-year PQE lawyers will receive £104,500 up from £82,500; 3PQEs will be paid £115,000 compared to £93,500.
All spot rate salaries have also received a ‘market increase’ and associates will be paid their annual bonuses for the 2015 financial year in July this year. Standard bonus payments for the 2016 financial year will be folded into associate base salaries from 1 August with changes backdated to 1 May 2015 and a new bonus scheme operating from next year to reward exceptional contribution.
A&O global managing partner Wim Dejonghe said: ‘Our new salary structure recognises the significant contribution our associates make to the success of the business. Our aim has always been to offer a competitive total reward package while retaining the flexibility to reward exceptional performance. The record results we reported this year would not have been possible without the hard work of our associates. 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.’
In terms of the associate salary race for the peer group, the move places A&O on par with Freshfields despite its salary freeze for junior lawyers at 2014’s levels. Slaughter and May made significant increases to the salaries it pays after it announced NQ’s will receive £5,000 more than last year, rising 8% from £65,000 to £70,000 as competition for talent hots up in the City. Demand for talent has increased in recent years following the expansion of US firms in the City, with newly qualified lawyers at Davis Polk & Wardwell paying £100,000 a year.
Clifford Chance made smaller increases in percentage terms than its Magic Circle peers, but matched the higher of the rates being offered to qualified lawyers by either Slaughters or Linklaters.
The news follows A&O’s impressive financial results for 2014/15 with an annual revenue of £1.28bn up £47m, or 4%, from £1.23bn, while profits per equity partner moved up 8% to £1.21m from £1.12m.
A&O’s revised base salaries comprise:
- NQ £78,500 – currently £66,500
- PQE 1 £92,000 – currently £72,500
- PQE 2 £104,500 – currently £82,500
- PQE 3 £115,000 – currently £93,500