Clifford Chance and A&O Shearman joined Linklaters this week in matching Freshfields’ NQ pay hike from £125,000 to £150,000, leaving Slaughter and May the sole Magic Circle firm still on the lower rate.
Following the pattern set by Freshfields earlier this month, all three firms are also increasing trainee pay. First-year trainee salaries at each firm will rise from £50,000 to £56,000, while second-year trainee salaries will increase from £55,000 to £61,000.
Commenting on the pay rises, Linklaters firmwide managing partner Paul Lewis said in a statement: ‘We are committed to rewarding our people competitively in our market. Our salary changes reflect this and enable us to attract and retain exceptional lawyers to provide the highest quality service to our clients.’
A&O Shearman’s statement, meanwhile, quoted new London managing partner Denise Gibson: ‘Our compensation structure gives us flexibility to reward expertise, performance and wider contribution and is designed to be highly competitive to reflect the markets in which we operate.’
The move also means that legacy Shearman lawyers at the now-merged firm will avoid taking the pay cut they faced when it was reported in April that A&O Shearman would stick with the legacy A&O NQ salary of £125,000 rather than matching Shearman’s £145,000.
However, some recruiters are warning that this latest round of NQ and trainee salary hikes will raise concerns among mid to senior-level lawyers.
Speaking to Legal Business, David von Dadelszen, director at James Legal, said: ‘This is a slightly alarming continuing trend that isn’t reflecting of increasing salaries for more senior lawyers where it may create retention issues. Clients must question getting advice from junior lawyers who are paid so highly.’
In a similar vein, Hannah Benger, business manager at Montresor Legal told LB: ‘Magic Circle salaries usually level out at the mid to senior level, which may create some issues, particularly given the consistent increases at leading US firms.’
She continued: ‘The other Magic Circle firms may find it harder to retain their top talent if they do not match the £150,000 NQ salary level. Although there has been some disparity in NQ pay between the Magic Circle in recent years, this is harder to justify given the significant and uniform increase at Freshfields, Linklaters and Clifford Chance.’
The increases will pile pressure to up salaries on other London firms. Slaughter and May last raised NQ salaries in November, with no further increase after its most recently six-monthly pay review in April.
However, many US firms continue to offer pay packets still more generous than even the increased Magic Circle rates. In Benger’s words: ‘The client base of Magic Circle firms is different to US firm clients who are used to paying a lot more.’
With NQ bonuses to be paid out in the coming months, Benger added: ‘It will be interesting to see what the Magic Circle firms do with bonuses. It is coming up to bonus season, and there is likely to be renewed interest in making a move to premium US firms if Magic Circle firms cannot compete with Cravath bonuses.’
