In UK salary war, London firms run major risks

Major UK law firms battling one another over salaries are taking a risk that higher costs hamper expansion plans and impede their ability to compete with US rivals.

年利达 last week boosted salaries 20% for newly qualified lawyers after a similar move by Freshfields Bruckhaus Deringer earlier this month. Those attorneys will now earn ￡150,000 ($188,000), up from ￡125,000 ($157,000).

“For a UK law firm to do this in a market, where it’s just harder to make money, that’s a hell of a statement,” said Scott Gibson, director of London-based legal consultancy Edwards Gibson. “It’s going to cost them.”

Bumping up salaries of newly qualified attorneys—the London equivalent of a first-year associate—adds to stresses of top UK firms that are already spending on their expansion aspirations during a slow period for the transaction work that typically fuels their bottom lines.

The firms have already been grappling with increased competition from US rivals, who flooded the London market and took business over the past decade. UK firms have also had to wrestle with issues such as Brexit and a lower value of the pound versus the dollar.

As a result the five Magic Circle firms—Allen & Overy, Clifford Chance, Freshfields, Linklaters, and Slaughter and May—have lost their place at the top of the London legal market they held a decade ago.

Simpson Thacher’s Top Partners to Make $20 Million This Year

Top partners at Simpson Thacher & Bartlett are expected to earn more than $20 million this year after the Wall Street law firm widened the spread between its highest and lowest-paid equity partners.

The move, which Simpson Thacher confirmed, comes amid signs that the competition to hire and retain partners at the top of the market has never been fiercer. Other Wall Street firms have introduced compensation changes to offer higher pay to some new hires or their highest-performing partners.

“We intentionally made the decision to adjust our compensation structure to attract and retain the best talent across our global platform,” Alden Millard, the firm’s chairman, said in a statement. “Our partners have embraced the change and are excited about the Firm’s continued growth and success.”

Soaring Salaries Force Tough Decisions From Big Law Leaders

I’m Roy Strom , and today we look at the management headache associated with tweaking compensation policies. Sign up to receive this column in your Inbox on Thursday mornings.

Big Law leaders face one of their toughest tests in making a case for changing compensation policies in response to a flurry of high-profile partner moves and rivals’ pay packages that can soar as high as $20 million.

Leaders selling their partners on big changes are embracing a management challenge that can roil partnerships or, if done successfully, unleash a firm’s financial power to attract top talent and defend against poaching.

Firms that have recently made or are considering changes to their compensation policies include Paul Weiss, Davis Polk, Simpson Thacher, and Weil Gotshal. The changes include instituting secrecy around partner pay (Paul Weiss), boosting the top end of partner pay (Davis Polk and Simpson Thacher), and rewarding rainmakers for generating business (Weil Gotshal).

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