Clifford Chance (CC) has become the second Magic Circle law firm to raise the starting pay for its associates to £100,000, a month after City rival Freshfields Bruckhaus Deringer announced a similar increase.
In a move signalling the widening impact of the pressure for talent from US firms on the City elite, CC has raised its compensation for newly qualified (NQ) solicitors from £91,000 including bonuses.
Freshfields’ NQs still have the potential to receive higher compensation, with discretionary premiums on top of the £100,000 base salary while the new figure at CC includes bonuses.
Freshfields’ hike from £85,000 has been linked to the increasing pressure to retain junior talent. The much-cited departures of heavyweight partners David Higgins and Adrian Maguire to Kirkland & Ellis has been cited by observers as a catalyst for London’s elite players to attempt to protect their stock at all levels and CC’s latest move confirms this. All eyes will now be on Slaughter and May, Linklaters and Allen & Overy after the trio set their NQ rates at £83,000 in their most-recent reviews last year.
The associate pay increases at Freshfields and CC, by £15,000 and £9,000 respectively, echo the steep pay rises of the early 2000s. After the banking crisis, the starting rate at Magic Circle firms was reset downwards from around £66,000 to £60,000. Real-term increases had generally been modest since – until now.
The need to absorb the cost of the resurgent associate pay wars is likely to push the City elite towards the US model: smaller pools of associates with higher billing targets, more outsourcing to regional firms or use of low cost centres and technology for due diligence and other lower-value tasks.
Yet despite the latest increases, several US firms are still able to offer their NQs a more remunerative package alongside a faster track to partnership. Kirkland’s starting rate is £143,000, while Latham & Watkins offers its City associates $190,000.