Will the London Law Salary War Polarize Law Firms?
As more law firms continue to ratchet up their pay rates in the London legal market there is only going to be increased competition for legal talent in London with salaries reaching what the Financial Times called ‘insane’.
The salary increases for newly qualified lawyers at US law firms like Quinn Emanuel (£180,000) and Gibson Dunn (£180,000) significantly outpace the recent raises at elite UK firms like Freshfields (£150,000) and Linklaters (£150,000).
This widens the pay gap between US and Magic Circle firms in London.
This London law salary escalation is driven by a war for talent among firms seeking to attract and retain the best graduates amid surging deal activity.
However, critics argue these exorbitant salaries are unsustainable and could foster an unhealthy work culture of excessive hours and burnout.
US Firms Salaries
While the Magic Circle firms have narrowed the differential from around 35-40 percent lower to only 12-15 percent behind their US rivals, the top US firms in London are still paying substantially higher salaries, especially at the entry-level.
The newest Cravath scale adopted by many US firms sets $225,000 (around £180,000) for first-year associates in London.
The salary war is intensifying as US firms continue expanding their London operations and competing aggressively for talent. UK firms risk losing associates to better-paying US rivals, straining their ability to grow and compete.
However, matching US pay levels could put significant financial pressure on the UK firms through higher fixed costs and potential increases in client fees.
Smaller UK firms outside the elite group are unlikely to match the latest Magic Circle raises due to the high costs involved.
This could further polarize the London market between a handful of top payers and the rest of the firms.
Starting Salaries for Magic Circle Law Firms
The starting salaries for newly qualified (NQ) lawyers at the Magic Circle law firms in London are currently £150,000 per year.
Specifically:
- Allen & Overy: £150,000 for NQ lawyers
- Clifford Chance: £150,000 for NQ lawyers
- Freshfields Bruckhaus Deringer: £150,000 for NQ lawyers
- Linklaters: £150,000 for NQ lawyers
- Slaughter and May: £150,000 for NQ lawyers
This £150,000 NQ salary level was reached after a wave of raises in 2022-2023, with the Magic Circle firms matching each other to remain competitive.
Before that, NQ pay at these firms ranged from £100,000 to £125,000 annually.
While very high, the £150,000 NQ salaries at the Magic Circle firms still lag behind the latest pay scales at some elite US law firms in London as set by firms lie Quinn Emanuel with their £180,000 pay rate.
For example, firms like Milbank are now paying over $225,000 (around £180,000) to their newly qualified lawyers in London, as are Quinn Emanuel.
US-based Hogan Lovells are paying £135,000 while newly qualified solicitors at Sidley now receive compensation equal to their peers at Goodwin Procter. It is believed that their salaries surpass those of the NQ pay levels at firms such as Vinson & Elkins and Kirkland & Ellis.
Slaughter and May raised the salary for its newly qualified (NQ) lawyers to £125,000 last year, a significant 9 percent increase from the previous £115,000. But there is no move yet on moving the NQ rates higher as it is reportedly still considering ts poston on NQ pay rates.
Doubtless, the firm will want to be matching its competitors as the pressure mounts on all the major firms – and the ‘underlings’.
The big money salaries are working to attract many into law both from university and other courses on offer.
For instance those wishing to start a legal career can study through online law and legal courses from the comfort of their own home. The salary attractions, quite apart form the lure of an interesting legal career generally, can provide major benefits for those aspiring to rewarding careers.
The Magic Circle salaries are significantly higher than most other UK law firms outside the elite bracket but the endlessly increasing salaries will be placing a range of issues on the law firms and much of it will be beyond just money – but the impact on culture and firm working environment.
There are concerns about creating a divide between the “haves” at elite US firms and other UK and international competitors unable to match such lofty pay scales.
