The senior partner at one of the UK’s top law firms has criticised pay at City of London legal practices after a bidding war for talent pushed rates for junior roles comfortably into six figures.
“The levels of pay in major private practice law firms are completely unsustainable,” Richard Foley, senior partner at Pinsent Masons, told the Innovative Lawyers Summit on Thursday.
He added: “You see stuff in the press about £125k as a starting salary for an NQ [newly qualified lawyer] . . . If I was on the other side of the table, I would be thinking how much more value am I going to get from that person?”
His comments follow a pay war triggered by US law firms competing for junior City talent that has driven the salaries of freshly qualified solicitors well above those of accountants and investment bankers at the top end.
US group Kirkland & Ellis — the highest grossing law firm in the world with revenue of $4.15bn last year — leads the way in paying its junior lawyers £142,000 a year at the current exchange rate.
According to headhunter Hays, the sum is just shy of the typical salary for an audit director at an accounting firm, while a junior auditor would expect to take home £40,000.
Investment banking graduates with an MBA can expect to earn base salaries below £100,000, according to two banking executives, though remuneration for more experienced roles is likely to be much higher.
New York-based White & Case this month announced pay for newly qualified lawyers in London would be increased by £25,000 to £130,000, starting from January. Lawyers with two-years of experience will receive a £30,000 rise.
In August, fellow US firm Dechert increased its London salaries for newly qualified lawyers to £120,000, a 3 per cent increase.
The bidding war has triggered tension at other firms, which cannot pay such big sums for new talent.
Michael Chissick, managing partner of London-based Fieldfisher, said: “My heart drops when I see newly qualified lawyers in US firms earning more than some of our partners. They don’t need to pay that. It’s not a market rate. They are creating a new market.”
The elite “Magic Circle” UK groups — which include Allen & Overy, Clifford Chance, Freshfields Bruckhaus Deringer and Linklaters — last year raised starting salaries for newly trained lawyers to £100,000.
They have since been forced to lower rates because of the financial strains caused by the coronavirus pandemic.
Solicitors qualifying in September at Allen & Overy and Clifford Chance will earn between £90,000 and £94,500, while the same group at Linklaters will earn £90,000, with a discretionary bonus.
“The salary war within the legal industry is just not winnable for the UK firms,” said Freddie Lawson, a director at recruiter Fox Rodney. “White & Case upping their salaries to £130k for an NQ [newly qualified], further stretches the gap between the elite UK firms and their US counterparts.
“[The battle is] so ferocious because law firms are built on talent.”
The attacks on high pay come as firms including Pinsent Masons and Herbert Smith Freehills face scrutiny for accepting government help to furlough staff.
Many groups, including Herbert Smith Freehills, have since paid back cash after better than expected performances in the current financial year.
Some Magic Circle groups — such as Freshfields Bruckhaus Deringer, whose partners took home £1.8m on average last year — are also reassessing whether their remuneration structures are sufficiently rewarding outperformers.
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