The heart of the relationship between a law firm and its lawyers is a healthy balance between the effort and achievement of the lawyers on the one hand and the remuneration and career progression offered by the law firm on the other. If the law firm substantially alters one element of this deal, it is interesting to speculate what happens to the other elements.
The magic circle and its wannabes are announcing apparently major increases in salaries. Will partnerships become even more difficult to obtain? Are they about to unleash another bruising rise in their expectations of their young lawyers? I suggest an eight day working week. I’ve heard stories of 1,700 chargeable hours this year for magic circle lawyers, so the direction is strongly upwards but, hang on, still well below US firm requirements – and the same could be said about the salaries.
I am beginning to wonder if the legal press have got the wrong end of this story. The real interest surely lies not in how high the increases are, but in how low they are in comparison to salaries paid by some US firms.
Simply brilliant spin from Clifford Chance though, boldly taking the lead in this magic circle salary round and getting all the kudos available to those who lead the market rather than follow it, while dropping anchor in a sustainable, competitive but essentially conservative position of its own choosing.
And it’s possible to see some serious changes beneath the surface. There is the attempt to limit discretionary bonuses. It appears that salary increases are partly to be funded by restrictions on the bonuses which had started to form such a major proportion of overall remuneration. Two steps forward and one step back for the young magic circlers, then.
Another trend is to uncouple the link between salaries and years of qualification after a shorter period, so that the earnings of bright young things in profitable practice areas might overtake those of their less fortunate colleagues, stuck in less profitable work. Winners and losers there.
Then there’s the debate about who will pay for these salary increases. Of course, for all the wringing of hands, it’s the clients who will end up paying. Partners would be unhappy at any firm (and unable in some) to see a budget which puts their earnings into reverse. And any battle between the magic circle and their clients in the current market is bound to be unequal. There are few in-house counsel whose staff have the time and expertise let alone the enthusiasm to engage in the endlessly ballsaching business of monitoring and controlling magic circle charging practices. The very act of instructing the magic circle in some types of work tells the world there is zero interest at that client in controlling the cost of legal advice at all. If there was, that work would have been moved away from the magic circle long since.
There is of course another group that will have to pay for the refreshed salary expectations of their young lawyers. I refer to those law firms, large and small, whose businesses have so lacked vitality that they have been unable, even in today’s plenty, to build their profitability to match or exceed their competitors. Partners in those firms may end up paying for this year’s salary review with the independence of their businesses.
Leslie Perrin is managing partner of Osborne Clarke. He can be contacted at firstname.lastname@example.org