By now we are all too familiar with the ongoing salary war and eye watering headline NQ salary figures that seem to be rising weekly across the City’s US and UK law firms (twice I have tried to publish this but have had to rewrite it due to yet another announcement). Just as it seems things have settled another increase is announced. One could have been forgiven for thinking Freshfields announcement on Friday 1st April, that they were increasing base salary by a quarter to £125,000, was an April fools! It will have undoubtedly unsettled their magic circle peers who must now decide whether they match Freshfields or remain at their current rates (c.£107,500).
We didn’t have to wait long for a reaction with Slaughter and May announcing last week that from May their NQs will receive £115,000 (up from £107,500). With the remaining 3 magic circle firms yet to make a move, it seems likely, that in order to remain competitive, they will have to react, or perhaps this is an unprecedented breakaway move? Whether or not they react will also determine if firms in the silver circle and beyond will also have to decide whether or not to raise their salaries yet again, for many firms that would mean the 3rd or 4th increase in a 12 month period.
Behind the headlines there is of course the issue that there is now very little, if anything, between what firms are paying NQs and their associates at 1, 2, 3 pqe, a concertina effect, and that NQs in US and Magic Circle firms and are now earning as much, and in some cases more, than partners in the number of mid-City practices. A new reality in the ever intensifying battle for talent.
Last year saw unprecedented levels of everything! Salaries, deal activity, hours billed, recruitment and staff attrition, with a number of UK law firms reporting an average of 3 to 4 more job vacancies last year (2021) than the previous year. In an effort to retain staff and remain competitive we have over the last 12 months seen a break from the standard spring/summer review to firms advancing salary reviews to the start of this year, giving ad hoc increases, speedily reviewing bonuses and benefits and doing whatever they can to stay competitive and keep staff happy.
Sign on and buy out bonuses
A sure sign that demand is out stripping supply is the reemergence of sign on and firm’s buying out bonuses, so that recruits are not missing out on bonuses they have accrued at the firm they are leaving. As competition intensified last year sign on bonuses became common place. Firms have also had to be creative with bonuses in situations where the salary offered is out of synch with headline figures that have been published in the legal press.
Expectations around legal salaries
As salaries rise as do expectations, the money has to come from somewhere and billable hours targets and utilisation rates have risen accordingly. However, the feeling amongst junior to mid-level lawyers, in seek of the roles in the highest paying firms, in large part seems to be ‘make hay while the sun shines’. Yes, hours are long and client expectations are high, but many seem to be of the opinion that if firms are willing to pay salaries at this rate then spend a few years immersing yourself in the work and emerge in a few years to reap the rewards.
Whilst high salaries are hugely motivating for some there is a growing concern around mental health and work cultures in the law. Law charity LawCare last year published a survey of the profession that found the majority (69%) had experienced mental ill health in the previous year and SRA are expected to publish guidance, possibly later this year, on what good law firm culture looks like.
Our salary predictions
As there have been so many advanced reviews and ad hoc increases over the course of the last 12 months our prediction is that rises in this years summer review will not be headline worthy and will be used to realign those at the mid to senior level who have fallen out of line.
Talk to us about your next move and the salary expectations by getting in touch with any member of our team.