Newly-qualified wages at leading City firms have spiralled upwards this month following a breakdown in salary information sharing between the top firms.
Until now, the club or “magic circle” of senior and managing partners from the top firms met regularly and are known to have commissioned surveys on the going salary rates from an accountancy firm.
The arrangement has meant that salaries for newly-qualifieds at all the top firms have been remarkably similar, at around £27,000, for the past three years.
But this year, as the 1 May deadline for new pay levels approached, rumours circulated that some of the top five were upping newly-qualified salaries by as much as £10,000 to compete with US firms in London.
Herbert Smith is understood to have sent a memo to assistants about to qualify, asking them to question friends and acquaintances in other City firms about their levels of pay. Herbert Smith would not comment on the move.
At other top 10 firms, personnel chiefs have rung recruitment consultants desperate to find out “what the hell is happening with this year's market”, as one source commented.
A personnel partner at a leading firm said: “I think the club has been whittled down to five: Slaughter and May, Linklaters & Paines, Freshfields, Clifford Chance and Allen & Overy.” He added: “We are not in it – we would like to be.”
Lack of information and fear of a super-league of firms has fuelled wild rumours about what some firms are paying.
Allen & Overy was said to be paying around £36-37,000 when in fact it is paying £30,500, an increase of £2,500 on last year. Clifford Chance was rumoured to be offering £35,000 and is actually paying £30,000, rising to £31,500 after six months.
Speculation persists that Allen & Overy may have increased its salaries by £10,000 per annum for key lawyers.
The so-called “Club of Nine” was reduced to eight in 1996 when Stephenson Harwood was asked to leave. One of the rules of the club – which bars poaching between members – has already broken down overseas.
Norton Rose's new senior partner David Lewis said that US firms such as White & Case, which paid newly qualifieds £45,000, “are paying above the going rate, but are not big enough to affect the market”.