With the salaries being offered to junior lawyers increasing at break-neck speed, we thought it was time to offer a snapshot of how things are evolving on a national level.
Our recent analysis on ‘The Battle for Talent’ highlighted the scarcely believable rate of wage growth at the very top end of the market, and considered what was fuelling such growth, but it’s important to understand how these same factors are affecting every corner of the legal sector.
Top of the Market
It may be that the last you heard in news of record-setting NQ salaries, is that Milbank had upped its London NQ solicitor pay to $215k (just under £160,000), which the firm announced in late January. However, with the ink barely dry on Milbank’s press-release, Boston-headquartered Goodwin Procter announced that they were bumping their NQ salary by 10% from £147,000 to £161,500.
Plenty more US firms have since joined the fray, with several offering double digit salary hikes into the £140k+ bracket.
Where does this leave the Magic Circle?
All bar one of the magic circle firms currently pay their NQs a salary of £107,500, with Freshfields lagging behind on £100k.
When considering the enormous salaries on offer at US firms, it may seem that these heavyweights are being somewhat unresponsive, but that would be ignoring the fact that Slaughter and May, for example, increased their NQ salary three times in 2021; having started the year by reinstating an NQ salary of £90,500, the firm bumped it up to £100k in July, before doubling down in December to the current figure. That’s an almost a 20% increase in annual salary in an eleven-month period!
Will the magic circle need to look again at their NQ salaries in order to counter the advances made by their US rivals?
In addition, they may also need to consider the narrowed salary gap between them and other top tier City firms. Silver circle outfits like Macfarlanes, currently match Freshfields with £100k salaries, while Herbert Smith Freehills is edging even closer to the magic circle at £105k.
These figures might lead junior lawyers to question: if not for prestige, why would I work for a magic circle firm when I can take home as much—if not more—while achieving a better work/life balance in the silver circle?
With further rises expected at the top end of the market, Sir Nigel Knowles has expressed concern for a bubble-burst moment with salary inflation, but the fact of the matter is that not many individuals are actually receiving this salary. As much as headlines like to amp it up, it’s unlikely for your average lawyer to see anything as drastic as his.
While the salary war that’s currently being waged by elite US law firms affects only a tiny proportion of junior lawyers, it would be wrong to assume that these increases and, importantly, the trade winds behind these increases do not affect NQs right across the country. Indeed, the notion that the London legal market is its own insulated bubble detached from the sector has been dispelled by recent regional advances.
DLA Piper’s recently announced increases have been felt much more in the regions rather than the City. What was an 8% rise (to £95k) in salary for their London-based NQs, was a gigantic 35% increase for NQs working out of the firm’s Sheffield, Liverpool, and Birmingham offices (£48k to a very attractive £65k).
Late last year, Addleshaw Goddard announced that it was increasing regional NQ pay by 11% across the board, which trumped the 9% pay rise offered to its London-based NQs.
On the flipside, however, is Clyde & Co which announced a whopping 14% pay rise for its London-based NQs without hinting at any increases in the offing for those working at the firm’s eight regional offices.
The Market as a Whole:
The important thing to remember is that the trickle-down of salary escalation is inescapable for all firms. First, when it comes to attracting new recruits, there is the increased competition of large law firms fishing in new waters, which increases competition for medium-sized firms and so on.
Secondly, the Covid pandemic has removed a degree of comfort that regional firms felt from a geographical perspective. With the massive uptake of working from home, the competitive insularity that regional firms had with a lack of local rivals—due to their geographical location—is gone, as people can work for almost anyone anywhere.
The pressures of competition are already being felt at the time of writing. We spoke to a recruitment manager at a medium-sized firm in the South-East who explained that the rise in salary from bigger names in the area was killing their recruitment prospects, as on several occasions, a few weeks after they thought they’d netted a new recruit, the candidate would renege on the offer and join a larger regional firm.
Finally, even if a law firm remains unaffected by either the encroachment of larger firms or the removal of geographical barriers, they will struggle to escape the upward salary pressure exerted by an inflation rate of 6%+.
In summary, no law firm can be entirely immune to the battle for talent’s trifecta. Whether it is the salary trickle down, apex firms encroaching into regional spaces, or the heights of salary dogfighting in London, the effects of inflation are unavoidable. Even firms that have held a safe spot for the longest time are facing pressure due to Covid’s restructuring of work culture, and are now facing down increased levels of competition, in an escalation which seems inescapable.
Overall—at least for NQs and junior lawyers—things are looking good in the salary game right now. However, while the economic rises are enticing, there is something to be found in Sir Nigel Knowles’ concern, as while there is no sign of salary growth slowing down, we might question how long can we expect this all to go on for?