Indian salary war escalates as global firms circle best talent

Despite heavy lobbying and GDP growth of almost 10 per cent, India is to all intents and purposes still off-limits to foreign law firms and likely to remain so for at least another one to three years, according to most expectations.

But many global legal players are already lined up in the starting blocks, with some twitching in anticipation of the liberalising shot that will begin the race in earnest.

One strategy for UK firms until that time has been to frantically set up shallow friendships with Indian firms. Another has been to build up teams of Indian lawyers outside India, a project made all the easier by the excellent common law schooling that most Indian lawyers receive.

UK and US firms, as well as reportedly Singaporean, Malaysian and other Asian firms, have been hiring significant numbers of trainees straight from Indian law schools or poaching associates directly from Indian firms.

The foreigners’ push has sent pay for young Indian law school graduates soaring by more than 50 per cent in the last year at top Indian firms, as reported by The Lawyer (7 April).

“This year we’ve had three salary raises already,” says Rajiv Luthra, managing partner at Indian firm Luthra & Luthra. He says the firm adjusts the salaries based on the competition and that graduate salaries have increased by up to 80 per cent this year.

But fighting a recruitment battle with foreigners leaves Indian firms at a disadvantage. “Our hands are a bit tied to compete with international law firms,” says Luthra. “We don’t have the same facilities, don’t have the same size, can’t have websites and are restricted by law. We can’t fight with the same sort of weapons and pay the same salary – fees are less than 40-50 per cent of those of UK firms.”

Salaries for a law school graduate at a top Indian firm can be £15,000, with the average market rate still below that amount. But that is not the whole picture. “Luckily it’s much cheaper to live in India,” says Luthra. “A second-year associate normally has a chauffeur-driven car and be driven to work reading the newspaper in the back. It’s about the quality of life.”

The story is corroborated across all large Indian firms, but the salary war is not entirely the fault of foreign predators. Internal competition between local firms and Indian corporates hiring in-house lawyers has pushed salaries up still further. All of which sounds remarkably similar to the London salary war of 2000, when UK firms were pitched against US firms and in-housers were forced to respond with gritted teeth. Salaries spiralled, but only by a fraction compared with what is now happening in India.

Clifford Chance graduate recruitment partner Lynne Johannson visited three of the top Indian law schools in 2007 to formally present the firm to students. A large Indian alumni also helps spread the word. Clifford Chance took on more than 10 trainees from India in the last round after reportedly receiving more than 100 applications.

By itself this is still a drop in the (Indian) ocean, but Allen & Overy, Herbert Smith, Linklaters, Olswang, SJ Berwin and others are all recruiting from India – and the number of unsolicited applications almost certainly received by other firms pushes that number up further.

No firm has a formal milk round of UK proportions yet, but Clifford Chance India practice head Chris Wyman says: “We get so many applications anyway from a large number of Indian lawyers, from Indian partner level right down to law students.”

He attributes the interest to Indian lawyers looking for international experience and wanting to improve their CVs, comparing it to what Antipodean lawyers have been doing for years.

What is clear is that the Indian legal market is becoming more global, with liberalisation neither here nor there. But the important question is how and if Indian firms will adapt and survive once the market does open up.

“I’m not particularly sympathetic to the argument that they haven’t had time to prepare,” says one UK partner. “We’ve been knocking on their door for more than a decade – it’s always been clear it was going to happen.”