Clients warned this week that they do not want to fund pay increases for assistant solicitor salary rises at magic circle firms. Bonuses and increases should be paid by partners, they say. Or if not, then by higher leveraging.
But the magic circle partners know that loss of business because of pay hikes is unlikely. Relationships with good clients can be managed and pay awards funded through a combination of higher hourly rates, harder work and fixed fees. The magic circle is not worried by the cost of salary increases. But the second tier should be.
The real impact of the salary hikes will be felt at medium-sized firms. They are the potential fall-guys in the pay game because it may be that they cannot afford, or do not wish, to stay the pace.
The reason top firms can afford to pay more than £44,000 a year to lawyers still wet behind the ears is because they do the high volume transactional work that commands multimillion pound receipts. High value work gives them the cash to attract the best brains. A Premiership of law firms with superstar players is the future.
The dilemma for second-tier law firms is how to attract the best lawyers when they do not do the volume of high-yield work to justify the expense. It's a catch-22. Buy the brains and compete, or forego the elite and lose out. When The Lawyer revealed that SJ Berwin was to join the big boys with salary increases to compete with the top US firms, it felt it had the clients to do so. The rest will have to make up their minds. Dine at the top table, or make do with the crumbs.
