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Allen & Overy (A&O) has awarded its associates inflation-busting pay rises and unveiled a new bonus structure connected to the firm's overall profitability in a bid to bolster retention rates.
As first reported on www.thelawyer.com last Thursday (12 October), the magic circle firm is ditching its current bonus system and will see a hike in pay of 15 per cent across the board for London associates and trainees, effective 1 November 2006.
Associate bonuses in London will now be linked to the value of a partner profit point, which last year was worth £24,008. The bonus, which is not linked to profit of a practice group or chargeable hours, will kick in at two years' PQE.
Under the new structure, mid-level associates with two to four years' PQE will be eligible for a maximum award of 0 to 100 per cent of one partner profit point, while senior associates with five to seven years' PQE will qualify for a maximum of 200 per cent of one partner profit point.
A new salary band has also been created for senior associates of between £98,000 to £150,000. The new roles of senior associates and counsel were floated by the management last year and announced last week. Most, although not all, associates who have five years' PQE (or equivalent) are eligible for promotion to senior associate level. In contrast, the firm said very limited numbers of associates could expect to be promoted to counsel.
Under the new scheme associates with two years' PQE can have the potential to earn a maximum of £104,408. This eclipses the amounts paid by the rest of the City's top 10 firms (see table).
Meanwhile, in theory, senior associates at A&O have the potential to earn almost £200,000, made up of a £150,000 base salary and a £48,016 bonus.
But the first round of bonuses will not be paid for 21 months. Associates eligible for an award will find out the percentage of their bonus at the end of the current financial year. The value of the bonus will be confirmed next July after the firm's accounts are audited, with the bonuses being paid out in July 2008.
A&O's HR director Genevieve Tennant told The Lawyer: "The whole plan is to retain and reward high performance."
Unlike in most other top 10 City firms, newly qualified associates will not be eligible for a profit-linked bonus. However, they will qualify for a flat payment, which will only be paid out to them once they reach two years' PQE.
Underpinning the initiative is a competency framework for associates whose structure mirrors that of partners. A&O will also continue to roll out its new career management programme. Earlier this year the firm held its inaugural senior associate conference in Brighton.
A&O managing partner David Morley said: "The biggest message we got from associates is how to do better in terms of appraisals and career guidance."