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2011 UK law firm salary reviews

By Robina Clough

 

Click here for updated coverage 

 

It’s that time of year again. UK law firms are beginning to announce their reviewed 2011 associate pay levels. At this stage, it’s a mere trickle of declarations, but now that someone has taken the brave move of being the first to announce (stand up and take a bow Slaughter and May), it will likely only be a matter of weeks, if not days, before we get a clearer picture of  how much London associates will be taking home in their next pay packets. We had been predicting only small pay increases for 2011, at about (or just below) the level of inflation, but it seems even that was a slight over-estimation on our part. That said, a number of journalists and other legal commentators we have spoken to over the last few months insisted that, given the minimal increases (and in fact some decrease) over the last few years, there surely had to be more robust base salary rises in 2011.

 

Last week (5th May) Slaughter and May announced an increase (albeit modest) in the base salaries at each level of post qualification experience (“pqe”), excluding newly qualified (“NQ”). Those at the NQ level will continue to take home £61,500, where as the 1 pqe base salary increases by 1.5% (from £68,000 to £69,000), at 2 pqe by 2.7% (from £74,000 to £76,000), at 3 pqe by 1.8% (from £84,500 to £86,000) and at the 4 pqe level by 1.6% (from £93,000 to £94,500). Unlike many UK law firms, Slaughters conducts bi-annual salary reviews and will be looking again at its figures November.

 

And now Allen & Overy have announced an out and out freeze of their pay bands. A spokesman for the firm said that they had decided not to increase salaries due to relatively flat turnover for 2010/11.

 

As with many UK law firms, in 2010 both Slaughter and May and Allen & Overy announced only small rises on the previous year and in 2009, salaries in effect actually decreased – at least the amount at each level of pqe was a reduction on 2008 (see 2010 salary udpate for an explanation of pay freeze vs pay reduction).

 

Some “anonymous” associates are bemoaning the fact that there are no pay rises at Allen & Overy and that Slaughter and May are offering below inflation increases. But what they seem to be missing is the fact that, given the very nature of the law firm lockstep model of compensation, even with zero, or minimal, increase in the actual band, by virtue of the fact that they are just one year more qualified, they will see an increase in their take home pay. For example a 2010 NQ at Allen & Overy currently on £61,000 will see an 11.5% gross increase when they become 1 year qualified. For 1 going on 2 pqe, this increase becomes 16%. For Slaughter and May associates this is about 12% at each level. Considerably more than inflation.

 

However, if you compare those increases with the equivalent step up the lockstep back in the boom days (let’s take 2007 as an example) an NQ at Allen & Overy becoming 1 year qualified would have received a staggering 30% increase in their gross pay and a 1 pqe becoming a 2 pqe an even more eye-popping 40% increase.

 

Getting your ahead around what an actual increase, decrease or no change in salary bands actually means in terms of take home pay for lawyers sometimes feels like you are trying to work out Pi to the twentieth decimal point, without a calculator. The tables below with historic salary information will hopefully illustrate some of the points above.

 

Changes in lawyer salaries at Slaughter and May 2006 to 2011*

 

 

2011

2010

2009

2008

2007

2006

NQ

61500

61500

61000

66000

63500

54000

1 pqe

69000

68000

66000

71500

67000

60000

2 pqe

76000

74000

71500

84000

78000

67500

3 pqe

86000

84500

84000

90000

86000

75500

*we believe these figures to be a valid representation of Slaughter and May salaries, but cannot guarantee 100% accuracy.

 

 

Changes in lawyer salaries at Allen & Overy 2006 to 2011*

 

 

2011

2010

2009

2008

2007

2006

NQ

61000

61000

60000

65000

65000

55000

1 pqe

68000

68000

65000

71500

71500

60000

2 pqe

74000

74000

71500

84000

84000

70000

3 pqe

85000

85000

84000

92500

92500

76000

*we believe these figures to be a valid representation of Allen & Overy salaries, but cannot guarantee 100% accuracy.

 

We eagerly await news from the other major players in the market: will they do a “Slaughters” and make modest increases, or will they “A&O it” and apply a wholesale salary freeze to their bands? Perhaps a plucky top 10 firm will feel affluent enough to announce something over and above inflation, but that seems increasingly unlikely. As Edwards Gibson partner Scott Gibson was quoted in The Times: “We think the days of big pay rises are gone in the medium term. More measured increases will return in the economy picks up, but if it continues to splutter that will be reflected in lawyers’ compensation” (The Times 12.05.11 p.39 “Allen & Overy sets trend for freezing pay of all newly qualified City lawyers”).

 

Update: 12.05.11 

Linklaters announced that they will be following in Allen & Overy's footsteps and will also be keeping 2011 associate salary bands at 2010 levels.

 

Update: 17.05.11

Norton Rose has announced it is increasing its NQ salary by 1.7% from £59,000 to £60,000. Above this level associates are paid on a merit-based system rather than the traditional lawyer lockstep.

 

Update: 18.05.11

Simmons & Simmons has decided to freeze its NQ salary at £59,000. It too uses a merit-based remuneration system for associates with 1+ pqe.

 

Update: 19.05.11

Freshfields have made small increases across the board for its associate salaries. NQ = £61,500 (up 2.5%), 1 pqe = £69,500 (up 2.2%), 2 pqe = £77,000 (up 2.7%), 3 pqe = £88,000 (up 2.3%)

 

© Edwards Gibson 2011

 

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