US firms in London continue to set high targets and pay mid-Atlantic salaries

The majority of US law firms in London are still paying mid-Atlantic rates to UK lawyers and setting US billing targets for all of their fee-earners


According to research by The Lawyer/Taylor Root, the old trend is continuing. Only 6 per cent of US firms match the rates paid by top City firms, while the rest continue to pay up to 60 per cent more with 28 per cent paying New York rates.
Following a general slowdown in the economy, there have not been any significant salary hikes this year and the salary gap between UK and US firms in London is still as wide as ever.
On top of this, UK lawyers working in US firms are being seduced by tempting bonus and benefit packages. In order to recruit and retain UK lawyers, 14 per cent of US firms in London differentiate between US and UK-qualified lawyers when it comes to bonus levels, and almost a third when it comes to benefits. Generally, UK lawyers receive higher bonuses to compensate for lower salaries and are given generous benefits comparable to those included in the firm’s US packages.
Of US firms in the UK, 96 per cent pay bonuses and many take billing hours into consideration. 61 per cent look at general performance, while 71 per cent take billing hours into account. Only 16 per cent give automatic bonuses.
The billing culture also shows no signs of change and most US firms in London continue to budget for long hours. According to the survey, more than half the US firms in London set billing targets of between 1,900 and 2,199 hours per annum, compared with UK firms which target 1,500 hour per year upwards.
This suggests that US firms, despite launching in the UK, are continuing to take the lead from the US, where the culture of long hours and high salaries is still prevalent.
McDermott Will & Emery London senior partner William Charnley said that as long as salaries continue to be driven from the US, so will billable targets. He said that the London office of a US firm needs to adopt a US-style culture which best suits the requirements of its UK lawyers. “The effective culture is the US culture, to the extent that it fits with the needs and desires of the lawyers in the London office. As far as McDermotts is concerned, it has created a mid-Atlantic culture which best represents the norm for London culture,” he said.
However, White & Case head of finance in London Maurice Allen offers a different perspective. He said that taking salaries and billing targets from the US is paramount to the firm seeing the London office as a branch office. “This is typical of top New York firms,” he said. “At White & Case we follow the local mode of making money.”
Allen said that because hourly rates are generally 15-20 per cent higher in the UK than in the US, it is possible for US firms in London to generate the same profitability in the UK without adopting a US culture. “In the US, salaries and hours are higher but chargeout rates are lower. In terms of profitability what does this equal? Pretty much the same,” he said.
White & Case is trying to maintain its salaries at 20 per cent above UK City firms, while budgeting for 1,700 billable hours per year.
Another partner at a US firm in London said that it is firms paying mid-Atlantic salaries which are having the most difficulty. The complications start when firms paying mid-Atlantic rates require New York hours. “This is a great source of unhappiness,” he said.

US law firms in London salary survey 2002
US Associate salaries
Class Range (£k) Average (£k)
2001 75-86 82
2000 78-92 87
1999 83-103 94
1998 89-116 105
1997 96-130 116
1996 99-140 124
1995 106-147 130
UK associates on New York rates
Level Range (£k) Average (£k)
Newly qualified 81.5-87.5 85
1 year 85-94.5 93
2 years 87.5-105 102.5
3 years 95-119 115
4 years 104-142 130
5 years 115-152 138
6 years 120-156 144
UK associates on mid-Atlantic rates
Level Range (£k) Average (£k)
Newly qualified 60-80 67
1 year 60-85 75
2 years 67-95 82
3 years 71-105 89
4 years 78-110 99
5 years 84-124 106
6 years 94.5-140 116
UK associates on premium UK rates
Level Range (£k) Average (£k)
Newly qualified 46-55 50.5
1 year 48-65 56.5
2 years 50-75 62.5
3 years 60-85 72.5
4 years 65-100 82.5
5 years 65-120 92.5
UK associates on UK City rates
Level Range (£k) Average (£k)
Newly qualified 46-48 47
1 year 48-53 50.5
2 years 50-58 54
3 years 58-62 60
4 years 60-75 67.5
5 years 65-79 72
6 years 70-91 80.5
 
Source: The Lawyer/Taylor Root salary survey