Law firm Baker McKenzie has raised the pay of newly qualified solicitors to £110,000, above the level offered by some ‘magic circle’ rivals, as employers take different approaches to tackle the economic downturn.
Baker McKenzie raised the salaries of London-based junior lawyers by £5,000 on Tuesday, becoming the latest firm to take a more aggressive stance on attracting talent.
Several other firms have increased the salaries of junior solicitors in the past two weeks, including Herbert Smith Freehills, which has raised the salaries of new qualifiers by 14% to £120,000.
However, other law firms have avoided pay increases due to economic uncertainty.
In June, Allen & Overy told staff it would not raise the salaries of its most junior solicitors to more than £107,500. In a statement, the company said the move was a “prudent decision based on a number of factors, including the more challenging trading environment.”
Linklaters has emailed staff in recent weeks to say it won’t be “rushing” to match rivals’ pay rises. The email, first reported by the Legal Cheek website, said: “We don’t think the right course of action is to rush to match salaries to NQ level without giving due consideration to the impact of any changes and the wider economic context”.
Freshfields rivals Bruckhaus Deringer and Clifford Chance have both raised the pay of newly qualified solicitors to £125,000 in recent months.
During the pandemic, law firms have experienced a severe shortage of talent, as record deals have pushed the salaries of the most junior lawyers to over £160,000 at the most profitable firms.
Akin Gump Strauss Hauer & Feld is now paying £179,000 to newly qualified lawyers based in London, following a change in the exchange rate used to convert dollars to pounds.
But soaring inflation, tougher regulations and the war in Ukraine are now weighing on the demand for lawyers.
Kathleen Harris, head of the London office of US law firm Arnold & Porter, said: “I think we are in uncertain times overall, economically. . . We are in a very difficult position to predict what the future will look like – we have seen the general rumblings around what is going to happen with taxation, we all know the cost of living has gone up. . . What this means overall for wages in a service-oriented industry is unclear.
“I don’t feel like I did last year, where there was a real rush to get everyone to follow the wage war. . . This year feels. . . more thoughtful.
Recent salary increases for junior lawyers have triggered a wider overhaul of salaries at firms such as Slaughter and May. In April, the firm granted raises of up to 20% to partners to create a wider gap between the salaries of the most junior and the most experienced lawyers.
Ed Poulton, London managing partner of Baker McKenzie, which had revenue of $3.1 billion in the year to the end of June 2021, said pay for newly qualified lawyers had been increased as part of a salary review for all associates over the summer.
“If you increase the NQ salary, you should immediately assess the impact on the entire salary range,” he said. “It’s a tough balance between paying competitively for juniors and making sustainable business decisions.”