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National giant in radical shake-up of partner pay structure as it moves to integrate legacy practices two years post-merger
Addleshaw Goddard has smashed the North-South divide in its equity partnership by placing all new equity partners on the same entry level number of points.
The move, which carries no London weighting, is both a confirmation of Addleshaws' success in raising its profit and a challenge to its national rivals to be competitive on remuneration in London.
Until 1 May this year, new equity partners at the firm's northern offices entered the equity on 40 points, while City-based partners entered on 50 points. With a point last year worth £4,750, that represented £190,000 and £228,500 respectively. The firm has now introduced a 50-point entry level for all partners for the year 2005-06.
"Closing the gap between partners in the North and South is a way of banging the drum internally that we're one firm," said managing partner Mark Jones. "We account as one firm, there's no office division in terms of the figures, so there's no need for two points figures for entering the equity."
Although the change is dri-ven primarily by the political necessity to be one partnership, the move will inevitably bring additional pressure on less profitable national firms such as Hammonds and Pinsent Masons. Both firms offer City-based partners London weighting in their remuneration to take account of the higher cost of living and to be competitive in recruitment.
At Hammonds, where average profit per equity partner (PEP) is £160,000, London partners receive an extra £35,000. Pinsents partners get an extra £15,000 London allowance on top of an average PEP of £255,000 plus £500 per point. That means on the firm's 20 to 40-point lockstep, London partners will receive a total of between £25,000 and £35,000.
One partner at a national firm said of Addleshaws' move: "If I was a London Addleshaws partner, I wouldn't be happyÃ¢Â€Â¦ You're effectively being paid less [than northern partners]."
Jones confirmed that there was no London weighting at Addleshaws, where the average PEP last year stood at £404,000. He said he believed the firm was sufficiently profitable to remunerate all partners competitively.
"It's more important to have one partnership than to squabble over London weighting," added Jones. "Our profit-sharing structure pays our partners competitively in London. The fact that it may mean our partners in Leeds and Manchester are paid super-competitively we see as an advantage, not a problem."