A&O, Links set the tone with associate pay freeze

Associates hoping for bumper pay rises will be left disappointed if rival firms do as expected and follow the lead of Allen & Overy (A&O) and Linklaters.

As reported on The Lawyer.com last week (11 and 12 May), both firms ­confirmed that they are freezing salary bands but are allowing associates to receive pay rises by progressing to the next level.

Pay at Linklaters will therefore remain at £68,000, £73,000 and £85,000 for associates with one, two and three years’ PQE respectively. Newly qualified (NQ) rates at ­Linklaters also remained unchanged at £61,500.

The magic circle firm ­confirmed that it will be paying associate bonuses as usual, but would not reveal what proportion of ­assistants would receive them.

This is the second consecutive year that Linklaters has put associate salaries on hold. In 2009-10 it was one of a handful of firms to not freeze lawyers’ pay, instead preferring to reduce its ­associate pay bands, ­resulting in an effective pay rise of between 2 and 4 per cent for anyone moving through the bands.

This is also the second time A&O has decided to freeze remuneration ­packages for its lawyers. In 2009-10 the firm, in line with the market, froze its salary bands at 2008-09 levels and stopped associates from progressing to the next level, despite them gaining an extra year of PQE.

Last year, however, it removed the restriction on allowing marginal increases for 2010-11. At that point NQ pay rose from £60,000 to £61,000, while the one-year PQE pay band rose from £65,000 to £68,000.

The salary for a two-year PQE rose from £65,000 to £74,000, while the three-year rate was set at £85,000, up from £71,500.

After deciding to hold the bands at these levels for 2011-12, A&O said in a statement: “Trading conditions in the UK market remain flat. Clients face the same pressures we do in this ­market and it would be difficult to justify an increase in salary rates.

“Our associates do, ­however, benefit from rolling through the bands, recognising the value of the contribution they make to our business.”

The news followed ­shortly after Slaughter and May, the first firm to announce the results of its pay review, confirmed that its associate salary bands would rise by an average of 2 per cent following its biannual pay review.

Salaries for trainees and NQs at Slaughters will remain the same at £61,500, while there have been small pay hikes for associates with one to four years’ PQE.

One-year PQEs will see their pay packets increase from £68,000 to £69,000, while two-year PQEs have been offered a slightly bigger increase, with salaries going up from £74,000 to £76,000. Three-year PQEs will now be paid £86,000, up from £84,500, and four-year PQEs will see their earnings rise from £93,000 to £94,500.

Rival magic circle firms Clifford Chance and ­Freshfields Bruckhaus Deringer are expected to announce the results of their salary reviews later this month.

Elsewhere, DLA Piper has completed its annual review of London salaries, which has seen across-the-board increases for the vast majority of the firm’s fee-earners in all practice areas based on individual performance.

The firm operates a merit-based system of ­associate pay and therefore declined to disclose actual rates other than that for NQs, which currently stands at £60,000.

However, NQ salaries, along with those paid to trainees, are currently under review at the firm, with a further announcement expected in June.