A&O sparks salary war with 20 per cent hike

Allen & Overy

(A&O) looks set to spark a fresh salary war after boosting its associate pay by 20 per cent.

The magic circle firm will today (17 October) announce inflation-busting pay hikes for all of its lawyers as part of its plans to stem the exodus of associates.

A&O is raising its rates for London-based associates with two years’ post-qualification (PQE) experience from £59,000 to £62,000, with effect from 1 November. This will be followed by a further increase on 1 May 2006, when associates with two years’ PQE will be paid £71,000.

The firm also pays a discretionary bonus to all its staff. The average bonus over the past five years has been 12 per cent of basic salary. The next firmwide bonus payable to associates will be calculated on their November 2005 salaries. Assuming A&O pays a 12 per cent bonus at the end of the current financial year, an associate with two years’ PQE will pocket £78,440.

A&O declined to disclose the salary bands for associates at other levels of seniority. However, 500 London-based associates will receive pay rises of at least 10 per cent and three years’ PQE associates will also receive increases of around 20 per cent.

A&O’s decision to raise its associates’ pay is hugely symbolic, as the firm has not made half-year pay increases for more than five years. Managing partner David Morley said the firm is determined to be competitive. He added that the firm had a very good start to the financial year and wants to share its success with its associates.

However, Morley conceded that pay rises alone will not be sufficient to win the affections of its disgruntled associates. “Pay is only one element. It isn’t the silver bullet that solves all the problems,” he concluded.

A&O will report back to associates on the findings of its consultation on alternative career paths next month.