Meritocracy will rule in magic circle

Even magic circle firms are introducing a merit-based component to salaries

Lawyers’ pay: too high or too low? Billed by the hour or fixed fee? It’s an endlessly interesting topic, not least for associates currently feeling the impact of more merit-based pay structures. 

Now, it seems, firms are viewing strict locksteps as a little old hat.

Whereas once the only carrots associates could expect in their pay packets were end-of-year bonuses, firms are increasingly jumping on the merit-based bandwagon, with even the historically conservative magic circle getting involved.

Last week Linklaters confirmed it was introducing a merit-based element for associates above two years’ PQE. Some might see only 10 per cent of their salary altered, depending on their performance, but others higher up the ladder could see a bigger variation according to performance criteria.

The policy illustrates a move away from rewards based on hours billed – the key criteria for bonus payments. As one source notes: “If someone’s an idiot but works very slowly, they would have high chargeable hours and we wouldn’t recover that money.”

carrot

Merit-based systems judge lawyers on performance-related criteria instead, such as teamwork and client services. RPC embraced the concept wholeheartedly in 2009 for associates. Last month, it rolled out the system to NQs, scrapping the flat-rate salary entirely in favour of a 100 per cent merit-based system from September 2014.

According to RPC, lockstep is so 2012 and the concept of flat rate has “passed its sell-by date”. Now its most impressive NQs entering the market in the most competitive areas could earn above those offered by major City firms.

For anyone not in that category, though, the base rate for London NQs will be less than the £58,000 they currently earn.

The move to merit-based isn’t a new idea. In 2009, Allen & Overy, Ashurst, legacy Lovells, legacy Norton Rose and legacy Pinsent Masons converted, but the magic circle has been more cautious.

Freshfields introduced a new ‘career milestone’ structure in May 2012, scrapping the PQE ladder, and Slaughter and May abandoned its rigid associate lockstep in 2013 to emphasise performance more.

So, who will be next for the system of carrots and sticks?