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UK City Law Firms Assistant Salary Summary 2010

Historical Context
The UK City Law Firm salary reviews of 2009 were overwhelmingly characterised by the outright freezing of assistant base salaries. Traditionally, at review time law firms would tend to apply a small increase to the salary band for a given level of post qualified experience (“PQE”) at the same time as a lawyer would, by means of the lockstep model, automatically move up into the next pay bracket. This would typically lead to an assistant solicitor seeing an increase of around £6000-£10,000 in their annual gross pay. In 2009, however, the majority of UK firms continued to pay the same annual salary to their lawyers, despite the fact they were one year more qualified. The minority of firms who use a merit-based system of pay also on the whole kept 2009 salaries at 2008 levels.

This bold move was first announced in the City by Freshfields in February 2009, having taken a steer from a handful of New York rate paying firms in the US (lead by Latham & Watkins) who had opted to both freeze salary bands and not matriculate lawyers up to the next year of the lockstep in their annual 1st January salary reviews. The rest of the City soon followed suit and the general trend of outright pay freezes quickly emerged.

Whilst the freezing of salaries in 2009 was ultimately the result of the UK economy entering recession, the exceptional salary reviews of the preceding few years led to assistant salaries reaching unsustainable levels.In 2006 and 2007 base salaries increased by around 10-15% each year and even in 2008, when the market had already substantially declined, salaries continued to rise by an average of 3-4%. By the time the 2009 reviews were completed, we found that average base salaries for any given level of PQE were lower than those of 2007, with newly qualified (“NQ”) salaries at Premier City rate paying firms having dropped back to around £59,000-£62,000 from highs of around £65,000 in 2008.

2010 Salary Reviews
The immediate prospects for the UK economy are by no means certain, with commentators from The Economist to the Financial Times unable to settle on either a short or mid-term prognosis. There is, however, at least some sense of optimism in the UK legal market, with redundancy programmes generally a thing of the past and the gradual return to external fee-earner recruitment at many City law firms.

To the relief of many assistant level lawyers (but to the likely chagrin of the law firm management), the 2010 salary reviews brought about, on the whole, the unfreezing of salaries across all levels of PQE. Whilst this doesn’t mean to say that actual salary bands went up, assistant solicitors have at least been able to progress through the lockstep thereby automatically receiving a pay increase.  Often the trend setter, Freshfields was the first of the magic circle firms to publicise 2010 salaries, announcing that PQE bands would remain the same as in 2009, but assistants would gain a c. £6,000-£10,000 pay rise by moving up the lockstep. Like dedicated followers of fashion, the rest of the magic circle subsequently announced their reviews and, in contrast to Freshfields, actually introduced slight increases in the band for each level of lockstep, although generally only the region of around £1000-£2000. Not wanting to fall below its peers, Freshfields backtracked on its decision to freeze the lockstep and also introduced small increases. 

Like in 2009, the trend set by the magic circle firms of unfreezing salaries has been replicated across the market, although on the whole firms have tended to keep the bands at 2009 levels.

In Figures
These figures are intended as a general guide to assistant remuneration in City law firms and therefore include representative amounts from merit-based paying law firms as well as those using a lockstep model. Base salaries above 3 years’ PQE tend to be merit-based regardless of whether the firm currently uses a lockstep or merit system.

PQE

Magic Circle

Top 20 City

Mid-Market

NQ

£60,000-£61,500

£58,000-£61,000

£54,000-£58,000

1

£67,500-£68,000

£63,000-£68,000

£60,000-£66,000

2

£72,000-£75,000

£66,000-£73,000 £64,000-£72,000

3

£82,000-£88,000

£71,000-£85,000 £69,000-£78,000

 

Merit-based Pay
The debate on the pros and cons of the traditional lockstep pay model and whether merit-based pay is or isn’t a more relevant way to remunerate lawyers in this day and age continues to rage. In fact, regardless of which side of that particular fence you sit, the arguments either way are both abundant and protracted and would be worthy of an article in their own right.

Over the last 3 years there has clearly been more of an appetite for law firms to develop some semblance of merit-based pay structures (albeit inextricably tied to the concept of lockstep more often than not), with firms such as Ashurst, Addleshaw Goddard and Pinsent Masons being relatively early pioneers of such systems. In 2010, a range of other firms announced moves to merit-based pay includingOlswang, Simmons & Simmons, Stephenson Harwood, CMS Cameron McKenna, Hammonds and Field Fisher Waterhouse. In 2009 Freshfields announced it would be introducing a quasi-merit-based system with “milestones”, but this has now been pushed back to 2011.
 
Summary
In short, compared to previous years, there isn’t really an awful lot to comment on when it comes to the 2010 UK City law firm salary reviews;things are pretty much where they were last year. What is perhaps more interesting is how today’s pay rates sit in the context of the last few years and what to expect in 2011 as the market (hopefully) returns to healthier, “pre-Lehman” levels.

 
For more detailed advice on UK law firm salaries, please contact one of our consultants who will be happy to advise you.

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