- Date
- 4 August 2021
Big Law Dishes Out Big Money to New Associates
Big Law Dishes Out Big Money to New Associates
By Adelina Budulan |
The Story
US law firms have frazzled the London legal market with eye-watering pay increases for newly qualified (NQ) solicitors. Several NQ packages now stand at over £130,000 a year, with Vinson & Elkins taking the cake at £153,400 a year.
Hefty bonuses are also added to the mix, with “anything between $25,000 to $100,000” on offer for some NQs (Financial Times). By contrast, London’s elite law firms, collectively known as the Magic Circle, have just bumped up pay for NQs to £100,000 a year.
What It Means For Businesses and Law Firms
The first half of 2021 saw all-time high levels of mergers and acquisitions activity. This dealmaking has been fuelled by friendly economic policies, including ultra-low interest rates and the increased use of quantitative easing* by central banks (The Economist). As a case in point, private equity firms alone completed deals worth approximately £500 million in this period (Financial Times). The deal-making frenzy sent the demand for legal expertise through the roof, prompting law firms to flourish despite the ongoing pandemic.
It has been argued that “[the] busy market combined with lawyers leaving because of burnout has triggered high demand for associates” (Financial Times). With the supply of associates being limited by a host of factors, including the requisite academic and professional credentials, law firms have found themselves engaged in a neck-to-neck battle for attracting and retaining talent (The Economist). Top-tier US law firms appear to be banking on money to do the job. With the so-called “bidding war” spilling over into the London market, several British law firms have felt compelled to increase their NQ packages as well (Financial Times).
Nevertheless, a sizeable pay gap remains between the American titans and their British competitors. Some attribute it to longer working hours** and the fact that US law firms give out fewer London-based training contracts than their British counterparts (The University of Law blog). In the future, some firms might consider increasing their pay even further, ramping up the perks on offer, or implementing alternative arrangements to address the looming issue of burnout.
