The seemingly ever-increasing NQ salaries have had expected, and some more unexpected, effects across the market. So, what does that mean for you?
Higher salaries at a wider range of law firms – silver circle and others.
The options for all lawyers looking for top salaries have vastly increased in the last year. While the US firms paying New York rates continue to lead the way, the dominance of magic circle remuneration packages in the UK market is being challenged by the traditional ‘silver circle’ firms such as Norton Rose and Macfarlanes, increasing their NQ rates to £105,000 and £107,500 respectively. This offers compensation similar to magic circle firms without the expectation of higher billable hours giving associates a choice - take the opportunity to work for the same money with fewer target hours in the silver circle firm, or similar work for more money with US firms.
Sustainability? Burn Out?
To offset the cost of increased salaries, some law firms have raised their target hours, thus putting further pressure on associates to meet work targets, creating a scenario where associates have joined a firm with an idea of what their targets hours would be and have found the ground shifting beneath their feet, leading them to quickly reconsider their future.
In recent years, mental health awareness is increasingly being recognised by firms as a vital aspect of their pitch to potential new recruits – initially in response to fallout of the covid pandemic and now increasing pressure on billable targets. In attempt to retain associates some firms have started to introduce quirky measures: Slaughter and May have recently brought in a ‘bring your dog to work’ scheme to help with those stresses, while other firms offer office saunas, swimming pools, massages, and all expenses paid weekend trips abroad.
Loss of client loyalty
Another potentially unseen impact of the current NQ hikes is for partners and senior associates trying to nurture a client following. If firms are introducing aggressive increases in chargeable rates to compensate for raised associate pay, this may damage relationships leading to significant clients moving if they are either unable or unwilling to pay the new higher rates. As the UK economy teeters on the edge of recession, clients are likely to ask tough questions. Could another London law firm or even a regionally based firm do the work at a more competitive rate?
Salary bunching
Salary bunching is one negative effect of the increases across the market with many mid to senior level associates voicing their displeasure at their firms’ reluctance, or at least tardiness, when it comes to increasing their pay levels. This is most common amongst firms engaging in the salary war. There is a perception that these firms have compromised for the sake of an attractive headline NQ figure, leading to only minimal increases in compensation per PQE level.
It was interesting that Linklaters and A&O have decided to make a stand at £107,500, with Linklaters citing in an internal email the need to consider ‘impact of any changes and the wider economic context’, and ‘how any changes would be applied across all PQE levels’ (from a recent Legal Cheek article 1st July). This feels like a risk which may pay off, perhaps supporting talent retention at more senior levels by retaining the integrity of their salary bands.
Mid-town competitiveness
Firms traditionally seen as offering an improved work life balance have also been increasing their compensation while aiming to maintain target hours – a real weapon in the fight to attract talent in a very competitive market. Offering a great work life balance and good quality work have always been the key draws of the mid town firms, however previously some lawyers have struggled to make the trade off in remuneration work for their lifestyles. The recent salary rises in this part of the market have been a game changer as now people will still be able to maintain an excellent quality of life whilst perhaps gaining the time to enjoy it. It is now very possible for a junior lawyer to be earning nearly £100,000 and have an annual billable hours target below 1,400.
A force for good
Overall, the salary war has been a force for good in the legal world. Although it has attracted national news headlines alongside the latest mini budget and of course the decreased tax burden of the top earners, for lawyers the salary war has been creating more options for people to sculpt their career to their preference.
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