Countdown: HMRC’s LLP tax changes to go ahead in April

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The controversial debate over taxation of limited liability partnerships (LLPs) has reached a decisive stage as changes are scheduled to press ahead on 6 April, while individuals have been allocated more time to contribute capital, HM Revenue & Customs (HMRC) announced late last Friday (21 February).

Having long been accused of unfairly treating all partnerships as tax avoidance vehicles, the Government has been taking meaningful steps to reset the relationship as it has ‘become evident that many LLPs have members who are engaged on terms similar to those of employees rather than traditional partners’, according to guidance notes published by HMRC last week.

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Merit driven pay – Slaughter and May introduces discretionary associate bonus

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Building on its decision earlier this year to introduce an element of merit to its associate pay, Slaughter and May has overhauled its associate bonus, moving away from a ‘blunt instrument’ flat rate bonus of 5% to a performance and seniority related uplift.

The overhaul – which was unveiled by the Magic Circle firm today (2 December) and follows its decision in January to create ‘good’ and ‘exceptional’ salary bands for associates from 4.5 years post-qualification experience (PQE) and upwards – will see associates paid up to a 12% bonus based on both their PQE level and performance. Continue reading “Merit driven pay – Slaughter and May introduces discretionary associate bonus”

Quarter of in-house lawyers’ salaries frozen in past 12 months as average increase falls

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Almost a quarter of in-house lawyers suffered pay freezes in the last 12 months, double the 10% who had their pay frozen the previous year, according to recent research from Thomson Reuters.

The Incomes Data Services executive compensation review found that the impact on the most senior in-house counsel was the most dramatic, with 30% of employers freezing basic salaries for their heads of legal, up from 13% in 2012.

The review also finds that this is the third consecutive year that in-house lawyers have seen below-inflation salary rises, and concludes that the increased number of pay freezes is having a ‘dampening effect’ on salary rises generally. Continue reading “Quarter of in-house lawyers’ salaries frozen in past 12 months as average increase falls”

HMRC review raises questions over law firm financing as banks tighten up lending terms

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Law firms are facing a shake-up of their banking and taxation arrangements as both lenders and HM Revenue & Customs (HMRC) move to minimise their losses under the current system.

Following HMRC’s consultation on limited liability partnerships, draft legislation will be unveiled in its autumn statement, which is expected to substantially tighten the criteria for favourable tax treatment under partnership.

The legislation, which according to Norton Rose Fulbright partner Dominic Stuttaford may be tweaked but is unlikely to change tack, is expected to say that a partner is someone with a share of the equity – and of the risk – leaving the status of salaried partners in limbo. Continue reading “HMRC review raises questions over law firm financing as banks tighten up lending terms”

Asia-Pac continues to challenge new entrants as DLA Piper freezes Australia salaries

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The impact of the Australian downturn has once again been thrown into sharp relief after DLA Piper’s staff in the region were told not to expect pay rises and some partners to expect a drop in pay as the office failed to meet its targets.

As first revealed by RollOnFriday, an email from chief operating officer and stand in local managing partner Andrew Darwin told staff ‘for many…there will be no increase in base salary this year and for others there will only be a modest increase.’

Local partners, meanwhile, were told: ‘many partners will have no increases or, in some cases, a reduction in their remuneration.’ Further savings are also expected to be made on expenses. Continue reading “Asia-Pac continues to challenge new entrants as DLA Piper freezes Australia salaries”

Guest post: Forget Dewey – what you need to be assessing on strategy and partner pay

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Law firm managers who are planning large-scale, hubristic expansion-by-acquisition should study the Dewey & LeBoeuf morality play very closely. The rest of us should not. It’s a distraction that diverts attention from what matters closer to home.

Permit me to analogise: those of us who are dealing with the daily stresses and strains of keeping a marriage healthy could, I suppose, closely study the example of Tiger Woods as a way of understanding how marriages fail in a spectacular explosion of adultery. Continue reading “Guest post: Forget Dewey – what you need to be assessing on strategy and partner pay”

A&O falls behind on associate pay table as it announces a freeze

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Allen & Overy (A&O) has become the latest of the Magic Circle to reveal that it is holding its associate salaries at last year’s levels, meaning its associates will rank as the lowest paid of its rivals so far.

The firm will continue paying newly-qualified (NQ) lawyers £61,500; £1,500 less than Slaughter and May, £2,500 less than Linklaters and £3,500 less than Freshfields Bruckhaus Deringer. Continue reading “A&O falls behind on associate pay table as it announces a freeze”

General counsel pay still bolstered by bonus culture

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The bonus, not the pay rise, was how companies rewarded the efforts of their general counsel (GC) in 2012. This reflects a changing rewards system for GCs, and caution from the managers who employ them.

These are the findings from two recent studies on wages for in-house lawyers. The first survey from UK employment research organisation, Incomes Data Services (IDS), showed average pay increases fell below the retail prices index last year.

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Another conventional wisdom

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A lot of firms talk a lot of rubbish about cohesive, collegiate partnerships these days but the competitive spirit within law firms is alive and well. Politicking, back-stabbing and underhand, cut-throat tactics are all employed to help everyone ascend the greasy pole. But there is another way. Snubbing the hard-nosed approach can work: just look at Bristows.

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Freebies needs to address profitability concerns from the get-go

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By the time you read this the Herbert Smith Freehills merger will be live – a firm with revenues of over $1.3bn and more than 2,300 lawyers.

After a difficult few years for Herbert Smith, will the merger be the right medicine for the firm? Well, it’s not a cure-all but it’s a good start.

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