Law firm Baker McKenzie has increased pay for newly qualified lawyers to £110,000, higher than the level offered by some “magic circle” rivals, as employers take different approaches to tackling the economic slowdown.
Baker McKenzie boosted salaries for London-based junior lawyers by £5,000 on Tuesday, becoming the latest firm to take a more aggressive stance on attracting talent.
Several other firms have raised pay for junior lawyers in the past two weeks, including Herbert Smith Freehills which increased newly qualified salaries by 14 per cent to £120,000.
However, other law firms have eschewed pay rises because of economic uncertainty.
In June Allen & Overy told staff it was not raising pay for its most junior lawyers to more than £107,500. In a statement the firm said the move was a “prudent decision based on a number of factors, including the more challenging business environment”.
Linklaters has emailed staff in recent weeks to say it will not “rush” into matching rivals’ pay rises. The email, first reported by website Legal Cheek, said “we do not believe that the right course of action is to rush into matching salaries at NQ level without properly considering the impact of any changes and the wider economic context”.
Rivals Freshfields Bruckhaus Deringer and Clifford Chance both raised newly qualified lawyer pay to £125,000 in recent months.
During the pandemic law firms experienced a severe talent shortage as record dealmaking pushed salaries for the most junior lawyers to more than £160,000 at the most profitable firms.
Akin Gump Strauss Hauer & Feld now pays London-based newly qualified lawyers £179,000, following a change to the exchange rate it uses to convert dollars to pounds.
But surging inflation, tougher regulation and the war in Ukraine are now weighing on demand for lawyers.
Kathleen Harris, head of US law firm Arnold & Porter’s London office, said: “I think that we’re in an uncertain period as a whole, economically . . . We’re in a really difficult place to forecast what the future looks like — we’ve seen the general rumblings around what’s going to happen with taxation, we all know the cost of living has increased . . . What that means overall for salaries in a service-led industry is unclear.
“I don’t feel like I did last year, where there was a real rush for everybody to keep up with the pay war . . . This year feels . . . more reflective.”
Recent salary rises for junior lawyers have triggered a wider overhaul of pay at firms such as Slaughter and May. In April the firm handed out increases of up to 20 per cent to associates to create a wider spread between pay for the most junior and senior lawyers.
Ed Poulton, London managing partner at Baker McKenzie, which had turnover of $3.1bn in the year to the end of June 2021, said newly qualified lawyer pay had been increased as part of a pay review for all associates over the summer.
“If you increase NQ salary then you immediately have to assess the impact across the whole salary range,” he said. “It’s a difficult balance between paying competitively at the junior end and making sustainable commercial decisions.”
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