A&O refreezes associate salaries after tricky trading year
Allen & Overy (A&O) is freezing associate salary bands following a sluggish financial year.
This means that associates will receive a pay rise by dint of progressing to the next step of the firm’s associate lockstep, but the value of each rung will remain unchanged from this time last year.
This is the second time the magic circle firm has taken such a step. In 2009-10 the firm, in line with the market, froze its salary bands at 2008-09 levels and stopped associates from progressing to the next level, despite them gaining an extra year of post-qualification experience (PQE).
Last year it removed the restriction to allow marginal increases for 2010-11. At that point newly qualified pay rose from £60,000 to £61,000, while the one-year PQE pay band rose from £65,000 to £68,000.
The salary for a two-year PQE rose from £65,000 to £74,000, while the three-year rate was set at £85,000, up from £71,500.
After deciding to hold the bands at these levels for 2011-12, the firm said in a statement: “Trading conditions in the UK market remain flat. Clients face the same pressures we do in this market and it would be difficult to justify an increase in salary rates.
“Our associates do, however, benefit from rolling through the bands, recognising the value of the contribution they make to our business.”
The news comes shortly after Slaughter and May announced that its associate salaries would rise by an average of two per cent, following its bi-annual pay review (5 May 2011). Trainee salaries at the firm to remain unchanged too.
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Readers' comments (22)
Threadneedles | 11-May-2011 4:09 pm
And one but only wonders what this year's PEP will stand at.
Once again, if the major UK-based law firms continue this trend of lacklustre compensation relative to not only other industries but also American-based law firms, the best candidates will increasingly flow to such better paid positions.
When a first year analyst at an investment bank racks in c. £70-100k (incl bonus) or a trainee at somewhere like Sullivan can earn £55k+, it is simply a matter of time before the exodus begins.
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Anonymous | 11-May-2011 4:41 pm
part the red sea, the exodus has begun (from MC firms anyway where its same targets at US without the enslave me money!)
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Anonymous | 11-May-2011 4:45 pm
The associates should be grateful that jobs are being outsourced to Belfast, otherwise there would be pay cuts
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Anonymous | 11-May-2011 5:00 pm
Threadneedles - people have been saying that for years and on the whole it hasn't happened. Fact is, the salaries are generous for what most of these people are doing, and at an individual level the payrise is still substantial. At senior levels there will be more flexibility and their bonus scheme.
Anyone want to bet on whether their hourly rates have been frozen?!
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Threadneedles | 11-May-2011 11:18 pm
Yes, you are quite right. People have been saying that there will be a flight to American firms for years. There are, however, a few noticeable changes of late that might actually make this a reality:
1. Trainees: Many of the top NY firms (eg S&C) stayed away from training their own trainees. They simply poached them after the MC firms had done the work for them. There are many ambitious trainees (and future trainees) who apply to such firms exclusively to gain preferable exit opportunities. If they no longer need to jump through such a routine and can instead go straight into such American firms, they will.
2. The end of the recession will allow students and junior lawyers to make the jump with fewer risks. The fear of American firms 'packin' up and goin' home' has been revealed for the smokescreen it was. Similarly, mass layoffs were far harder on lawyers with UK-firms then with their American rivals. The myth of that American 'eat their young' has dissipated as well.
3. Pay: Eventually the most talented lawyers and future lawyers will begin to look around and question the lacklustre salary increases at UK firms.
At the bottom end of the hierarchy, trainee salaries have fallen in real terms by a very significant amount. Pay increases (in many cases 0% for four years) have under-performed relative to inflation. Maintenance grants and the like have likewise fallen in both aggregate and real terms. Add to this increased tuition fees, students will increasingly be driven to looking at pay far more seriously.
Tuition fees aside, the same mediocre salary increases have afflicted associates at top UK firms. Why would you work for an MC firm at, say, £85k (3 PQE) when you could rake in £175k (3 PQE) at a Yank outfit? The most ambitious will likely side with the latter.
I am not saying that the talent pool is going to dry up suddenly. What I am merely pointing out is that those top-flight students and associates will be increasingly drawn to the better package being offered by our American cousins.
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Connaught QC | 11-May-2011 11:22 pm
Fully in agreement with the obvious comments by Threadneedles. UK firms are in for a wild adventure should the Americans ever decide to take recruitment more seriously in London.
Shocked at A&O's numbers though. Revenue flat? Have they not fired 10% of their staff, trimmed an equal number of partners and made big splashy announcements in opening new offices?
Instead of sending HR and operations to Belfast, someone should advise them to outsource their strategic planning. As one chief executive famously remarked, 'I pay McKinsey to think for me'.
Maybe A&O should consider doing likewise.
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Anonymous | 11-May-2011 11:46 pm
These bands apply to juniors. How much do mid level and senior associates earn? If at pqe6 you earn 120,000£, does the reduced pay in your early years really matter?
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Anonymous | 12-May-2011 4:55 am
The real question with A&O lies not in whether the associates' pay has been frozen, but whether the partners will reward themselves despite the pay freeze and the "flat" UK market. The last time pay was frozen and redundancies were made the partners increased their PEP by 10%.
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Desmond | 12-May-2011 10:28 am
As I see it, UK law firm salaries are still pretty good, and the only 'other industries' that pay more are the banks, but only once you get to a certain level.
The reason there will not be an 'exodus' to American firms (and the reason why there never has been such an exodus), is that US firms' commitment to the UK is never that clear, and your promotion prospects are much worse. Fine, getting made up to partner at an MC firm is not easy either, but it's still not too hard to move to a mid-tier firm from the MC at 7 years PQE and be made up to partner within a year. The same does not happen with associates moving from US firms.
The dilemma is short term greedy (US firm) versus long term greedy (UK firm).
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Anonymous | 12-May-2011 12:09 pm
I love the line "stopped associates from progressing to the next level, despite them gaining an extra year of post-qualification experience (PQE)."
PQE should be nowhere near any decision on whether someone should get paid more or move to a next level. It should be based on performance only.
Just because you've sat at your desk for a year doesn't mean you should be rewarded. Hilarious.
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