German firms join wages war as US firms spark recruitment crisis

US firms go all out to win Germany’s top Graduates: competition soars from investment banks and consultancy firms

German law firms are following fast in the footsteps of UK law firms as they teeter on the brink of a salary war.

Competition between German law firms for graduates has sent salary levels rocketing and first year graduates are now attracting up to DM195,000 (£62,600) including bonuses.

A survey published by German legal magazine JuVe Rechtsmarkt confirms the trend that foreign firms in Germany are offering the highest salaries.

US law firm Cleary Gottlieb Steen & Hamilton is now paying newly-qualifieds DM170,000 (£54,500) plus a profit-related bonus.

Allen & Overy, Baker & McKenzie, Clifford Chance Pün-der, BBLP Beiten Burkhardt Mittl & Wegener, Freshfields Bruckhaus Deringer, Hengeler Mueller Weitzel Wirtz and Linklaters Oppenhoff & Rädler are all offering up to DM150,000 (£48,000), with both Allen & Overy and Oppenhoffs offering additional merit-rated bonuses.

JuVe editor Aled Griffiths says: “The development in Germany is similar to New York. Salaries are rising fast, but law firms also expect considerably more work for their money.

“Some of the US firms coming into the market are adopting the billable hours targets from their home markets.”

The number of suitable graduates for the leading German law firms is estimated to be no more than 1,600 annually and law firms are now having to compete with investment banks and consultancy firms for the talent.

However, the length of time it takes German lawyers to qualify, which can be up to 10 years, makes salaries incomparable to levels in the US and UK.

Allen & Overy’s managing partner in Germany Mark Welling says that the traditional middle-ranking German firms will be hit the hardest.

“Gleiss [Lutz Hootz Hirsch] and Freshfields are recruiting large numbers of people so they are disproportionately put under pressure,” he says.

“Gleiss will suffer, as might Hueking Kühn Lüer Heussen Wojtek, because of its client base. A lot of the work it does is domestic work so although it will have to compete with the salaries of the international firms, it won’t be able to charge the same fees.”

But Welling denies that there will be a major salary war. “I suspect that the US firms will continue to offer large sums of money, but most young German lawyers will also be looking at the quality of work and the type of firm,” he says.

“They could go to a US start-up that has not been long established, but that would mean taking a risk on the quality and range of work. I think they will look carefully before making their career choice.”