Profession-wide move to merit-based remuneration tolls death knell for PQE

An increasing number of UK law firms are abandoning PQE associate lockstep systems in favour of more merit-based promotions.

According to The Lawyer’s exclusive research, the majority of the top 50 UK firms have created salary systems that will make PQE redundant. Some firms still have salary ranges based on PQE, but the distribution within the range is based on merit.

Many firms believe that remunerating lawyers and determining their charge-out rates to clients based solely on seniority is outmoded and not commercially viable.

Performance-based pay is also considered to reward high-flyers as well as in some cases latecomers to the profession, who may have alternative qualifications.

There is also the argument that to base pay on seniority could contravene the Age Discrimination Act, which prohibits recruiting in reference to age.

Less than two months ago Ashurst managing partner Simon Bromwich called for the abolition of PQE as a measure of progress, telling The Lawyer he said he would like to see PQE consigned to history.

For the past two years Ashurst has assessed its associates and their pay on merit and not seniority. It has also introduced the position of counsel as an alternative or added step to partnership.

Bircham Dyson Bell and US firm Arnold & Porter announced that they were scrapping PQE in May.

Bircham Dyson Bell HR director Richard Walden said associate lockstep was “outdated and fails to recognise the quality of work delivered”.

The firm replaced the PQE qualifier with a performance-based system called the Career Development Framework (CDF).

The CDF has four levels of seniority: solicitor, associate, senior associate and partner. According to Walden this framework ensures that people’s career progress is in line with achievements and performance, but also gives a more transparent and defined career path.

Guy Vincent, managing partner at Bircham, said dropping the PQE system provides an opportunity for people with exceptional talent to rise quickly through the ranks.

Another US firm looking to move to a performance-based pay system for its associates is Howrey. The firm intends to introduce the new remuneration scheme in January, the start of its financial year.

The firm’s managing partner and chief executive Bob Ruyak said the move was an attempt to introduce greater flexibility to cater for high-flying associates, late starters with alternative qualifications and part-time lawyers. On this side of the Atlantic, Allen & Overy (A&O) has also introduced a system in which there are three types of associate: junior, mid-level and senior. The associates are assessed on areas of expertise,such as client-facing skills.

A&O HR director Genevieve Tennant told The Lawyer that she believes the PQE system is now irrelevant.

“PQE doesn’t have any relevance anymore to senior associates who used to be known as lawyers with five years’ PQE and above,” she said.

Other firms, such as Berwin Leighton Paisner (BLP), Pinsent Masons and Simmons & Simmons, have introduced similar frameworks, breaking away from the traditional lockstep remuneration system.

Simmons’ assessment of its lawyers is based upon clients, people, expertise and commercial acumen.

A&O, BLP and Pinsents have also scrapped all references to PQE in their recruitment advertising.

Despite this move by so many in the industry, magic circle firm Clifford Chance and City player Norton Rose have both said they would continue with the PQE system.

In terms of remuneration, Addleshaw Goddard, BLP, Denton Wilde Sapte and Linklaters are currently conducting reviews into their salary structures.

Some firms have wide salary ranges within each PQE band, such as Herbert Smith, whose eight-year PQE ladder ranges from £67,000 to £110,000; and Shoosmiths, whose equivalent range runs from £32,000 to £85,000.

In some firms, while the pay scales go up with each year of PQE, the range each year is so wide that the average three year-PQE lawyer can still be earning more than an eight year-PQE lawyer at the bottom of the pay band.

Still using the PQE system, all of Travers Smith‘s eight year-PQE lawyers earn £110,000.

Unsurprisingly, the salaries of lawyers of the same PQE vary widely across UK law firms. A newly qualified lawyer at A&O, for example, can expect to take home £63,300 per annum. In contrast, a lawyer of the same level at Hill Dickinson would make £33,166.

For three year-PQE lawyers at A&O, the average yearly salary is £84,000, while at Hill Dickinson it is £42,263.

uk snapshot: how firms compare, 2006-07