Magic circle firm launches new financial package in bid to retain talent
Senior associates at Allen & Overy (A&O) could earn up to £200,000 as part of a complete overhaul of the magic circle firm's career structure.
As first reported on www.thelawyer.com last Thursday (12 October), A&O has abolished its current bonus system and will raise associate pay for London trainees and associates by 15 per cent, effective 1 November 2006.
Associate bonuses will now be linked to the value of partner profit points. Under the new structure, associates with five to seven years' PQE will qualify for a maximum of zero to 200 per cent of one partner profit point (or a maximum of £48,016 based on last year's profit) and a base salary of up to £150,000 (see back page).
However, the bonuses vest after 15 months and will not be paid out until July 2008.
At the same time, A&O is dropping the one-firm approach to associate pay. Managing partner David Morley said: "We've freed up all the offices around the world to operate their own reward structures."
A&O said its associates have welcomed the move. One associate interviewed by The Lawyer said: "It closes the gap between pay in law firms and investment banks."
But a former A&O associate said the new measures would not have tempted him to stay. "It will give the firm 15 months' breathing space and then they will have to re-tackle the retention problem," he argued.
City firms are still digesting the news. One partner at a top 10 City firm argued: "I wouldn't have thought there was market pressure to go as high as they've gone. It does seem to be rather dramatic."
But Slaughter and May, which was reviewing its associate salaries at the time of A&O's announcement, is being forced to go back to the drawing board.
Practice partner David Frank said: "We'll be reviewing our options. But it's too early to say quite where we'll end up."
The senior associate role was confirmed at the same time as the new pay structure. Most associates with at least five years' PQE or equivalent will be eligible for promotion to senior associate. Meanwhile, a very limited number of associates are expected to be promoted to counsel.
The first promotions will take place on 1 May 2007.