Proof, if proof were needed, that City law operates in a world without gravity. To anyone outside the Square Mile, the notion of twenty-somethings with virtually no hands-on commercial experience being able to earn £80,000 is incomprehensible and rather repulsive.
Allen & Overy‘s (A&O) 20 per cent pay hike for junior associates seems astoundingly generous, but, in fact, the firm has been panicked into action. As The Lawyer has reported over recent weeks, A&O has suffered a 25 per cent attrition rate, which is at the higher end of the City spectrum. And as the firm with the best derivatives practice in the City, it has been a constant target of investment banks seeking to add a legal backbone to their business.
All of this has echoes of 2000, when SJ Berwin sparked the first City salary war. But that was provoked by US firms during the ludicrous dotcom boom. This time round City law firms are up against the bottomless, inexhaustible pockets of the US investment banks. Lawyers can’t hope to match bankers and their bonuses, and A&O’s move won’t stop assistants leaving if they really want to, but a 20 per cent hike may make the waverers hang around a little longer.
Interestingly, the move flies in the face of law firms’ current obsession with costs. The pay increases are going to add a fair amount to A&O’s costs; so will its move to Spitalfields, despite its £59m war chest. But the firm has clearly decided that it is worth the risk. The last thing it wants is to court even more assistant attrition in a doomed quest to boost partners’ profit per point. Managing partner David Morley and HR head Genevieve Tennant have been thinking long and hard about career progression, and pay is only part of it.
But there is a worry. It is that law firms which mimic A&O will be spawning yet another deluded generation of young lawyers who believe that they’re worth this money because of their own special qualities.
So, here’s a friendly word to those lucky associates at A&O: remember that you’re not being paid £80,000 at the age of 26 because of your innate abilities. You’re being paid this because the management is terrified that all of its expensive investment and training will be wasted.
And here’s a final piece of advice: don’t ever bellyache to anyone outside the magic circle how hard you work. That would be in unspeakable taste, now more than ever.