Salary Survey 2012 London Private Practice
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1 Salary Survey 2012 London Private Practice 1
2 gmk is a legal recruitment company specialising in the placement of lawyers at all levels in private practice. Founded in 1998, we place lawyers in London, the regions, and internationally. We have compiled our 2012 Salary Survey to update you on recent shifts in salaries and benefits throughout a wide range of firms in London. 2
3 UK Firms London Market update Recruitment demand from law firms has continued apace in 2012 despite Eurozone concerns. Whilst some practice areas have slowed down, there has been an increase in demand in many corporate support areas (tax, competition etc) not seen since pre-recession. Demand for associates with 2-5pqe is particularly buoyant, and whilst the retention rate for newly qualifieds remains fairly stable, there are few positions available externally for those not kept on. There has also been some increase in related non feeearning areas such as professional support lawyers and compliance/risk management specialists. Strategically, firms have responded to continuing global challenges with national and global mergers and alliances, as firms look to secure competitive market advantage. This has led to some selective downsizing, though not to any sizeable degree. 3
4 London Remuneration As in 2011, more firms are moving away from the traditional associate lockstep model to a merit based associate development path has seen a continued increase in firms doing this, or at least adopting a hybrid system which becomes more merit based with seniority. From a management perspective, the flexibility it gives to remunerate according to a range of criteria beyond pure pqe, means that they can be more flexible in rewarding their best lawyers, and in attracting others within highly competitive practice areas. Competition for the best candidates is still fierce with the crème de la crème receiving multiple offers. This is especially the case for top tier commercial IT/outsourcing, finance, financial services, white collar crime/fraud and litigation/arbitration lawyers, and UK firms may continue to struggle to attract these candidates, when the financial rewards are indisputably greater within US firms. As in 2011, some firms have responded by offering sign on bonuses to highly sought after candidates in particular areas. However, whilst published PEPs have in many cases increased, the continued uncertainty in the Eurozone has meant that law firms have been fairly conservative in their 2012 salary reviews with predominantly marginal increases, and bonus payments being used instead to retain and attract key players. Most firms have frozen NQ rates (with the exception of Freshfields where under its new merit-based pay scheme, newly-qualified lawyers will earn at least 65,000-3,500 more than those at rival Magic Circle firms). Elsewhere there have been only small increases, and those predominantly at 1-4pqe. Beyond 5pqe the picture is less uniform as even those firms with pure lockstep tend to use an element of merit based pay at this level. Firms who have adopted merit based pay bands are much harder to categorise on a pqe table, and consequently the ranges can be quite broad. Large City Firms PQE Range ( ) NQ 59,000 65,000 1pqe 67,000 72,500 2pqe 71,000 82,000 3pqe 77,000 92,500 4pqe 85, ,000 5pqe 87, ,500 Mid Sized City Firms PQE Range ( ) NQ 55,000 60,000 1pqe 60,000 65,000 2pqe 64,000 71,000 3pqe 65,000 78,000 4pqe 73,000 85,000 5pqe 77,000 98,000 Smaller City/ West End Firms PQE Range ( ) NQ 41,000 56,000 1pqe 44,000 64,000 2pqe 46,000 68,000 3pqe 50,000 72,000 4pqe 57,000 80,000 5pqe 60,000 85,000 4
5 US Firms Market update The recruitment market for US firms in 2012 has seen steady rather than spectacular progress. The most buoyant practice areas in terms of recruitment have been finance, funds, financial services, litigation, corporate and tax. Remuneration A recent survey in The Lawyer indicated that 23% of associates currently at a US firm said they joined for financial reasons the highest rated single reason proportionately. With this as a backdrop US firms in London appreciate the need to retain their competitive edge financially. Furthermore as the IH market has improved, attraction and retention of key recruits has become more of an issue, as banks have returned to the market with remuneration packages unequalled even by the NY elite. US firms normally conduct their salary reviews in January. This year has (with only a few exceptions) seen either nominal increases or retention of the previous year s bands (though associates have continued to progress through pay bands as normal). Furthermore annual bonus payments at NY rated firms in London were frozen in January 2012 (for the fourth year running). Going forward we anticipate the lower bands of the New York figures (most of which had been frozen in January 2012) may rise in January 2013 if the market retains its current level of activity, and the Eurozone crisis does not deepen. New York PQE Range ( ) NQ 92, ,000 1pqe 96, ,000 2pqe 100, ,000 3pqe 109, ,000 4pqe 120, ,000 5pqe 132, ,000 Mid-Atlantic PQE Range ( ) NQ 65,000 84,000 1pqe 70,000 87,000 2pqe 77, ,000 3pqe 85, ,000 4pqe 90, ,000 5pqe 95, ,000 Whilst the NY elite continue to pay associates on the lockstep system, some other US firms have replaced this with merit-based banding remuneration systems, which place the emphasis on skills gained rather than time served, or at the very least where remuneration becomes more merit based with seniority. Consequently, whilst NY rates tend to be fixed and transparent, Mid-Atlantic rates have the greatest divurgence in terms of salary bands and salary increases this year. 5
6 PSL Salaries In general Generally PSL salaries tend to be pitched at somewhere between 10 15% less than equivalent pqe fee-earner salaries (obviously pro rated for those who work part-time). This is a reflection of the more regular hours worked. Some US firms discount more heavily than this, possibly reflecting the larger range of salaries there. However a few City firms will pay PSLs their fee-earning equivalent with no discounting. Salaries tend to plateau at the 6pqe+ stage, though Head of Team and Head of Knowledge Management roles pay well in excess of 100,000. Current market PSL salaries peaked in 2007 and during the recession salaries either remained static or dropped, as the requirement for non fee-earning functions fell. Consequently we have the situation, post credit crunch, where experienced PSLs who kept their jobs at top 20 City firms are usually on 90, ,000, but the salaries now offered to those moving into PSL roles at the same firms are quite a bit lower (almost back to rates). PSL salaries tend to fall within the following bands: Level Range ( ) Entry/Junior level 65,000+ Experienced/Senior level 80, ,000 Head of Team 115,000+ Head of Knowledge Management 120, ,000 Additionally, remuneration within the PSL market does differ greatly according to practice area. There is an oversupply of PSLs in some areas, mainly real estate, corporate and litigation. Salaries tend not to be quite so high for these as they are in areas such as pensions, banking, and financial services (which still command a premium if candidates are good and the firm needs someone with previous PSL experience). In particular, demand has increased most recently in these areas within US firms, again forcing salaries upwards. 6
7 PSL Benefits PSLs also receive all the normal benefits fee-earners do eg pensions, life assurance, private medical etc. Whilst previously there may have been an impact on bonuses, a more recent trend has been to establish guidelines for PSLs to achieve similar bonuses to their fee-earning peers, though these are generally no more than around 2-5% of salary and usually form part of the discretionary firm-wide bonus. Additionally, a few firms award further for good performance, and one top 20 firm has started to ask their PSLs to time record. For further information on PSL salaries please contact Deborah Adkins on or her at deborah.adkins@gmklegal.co.uk 7
8 Risk Management Roles Risk management is increasingly becoming an essential stand alone function as firms balance crossjurisdictional compliance whilst also operating within their own country regulations. As this risk-culture has been developed in law firms, risk management has been drawn away from fee-earners towards dedicated centralised risk teams. With the introduction of OFR, this will become an even more important focal point in the coming year, and risk management is a huge growth area within law firms. gmk places risk management candidates at junior, manager and head of compliance roles in City firms. Because these positions are non fee earning, salaries are not comparable to those of practising associates in the same area. However there is a shortage of experienced risk management lawyers in the market, and as demand outstrips supply, this may result in significant salary increases over the coming 12 months. Risk Management/Compliance Years experience Range ( ) NQ ,000-60, ,000-75, ,000-90, , ,000 Head of compliance & risk 120, ,000 Risk Management lawyers also receive all the normal benefits fee-earners do eg pensions, life assurance, private medical etc. 8
9 Benefits Packages Benefits packages have evolved hugely in the last decade, both as a means of attracting candidates, and of retaining current employees. Bonus schemes Whilst most benefits are fairly standard across the City, the area where there is most disparity is bonus schemes. There are dramatic extremes even within leading City firms, ranging from some Magic Circle firms contributing up to 40% of base salary (dependent on personal performance and firm profitability)), to other Top 20 firms with no bonus allocation. Generally however firms use bonuses as a tool to retain their associates, often in conjunction with merit-based pay. These are usually dependent on personal performance (ie chargeable hours), firm profitability and other significant individual contributions, and vary between 5 20% of base salary in most City firms. Whilst there are a number of exceptions, generally UK firm bonuses in 2012 have been slightly down on previous years. Bonuses for law firm associates in US firms have also been fairly mixed. In early 2012 New York rated firms froze their January bonuses for the fourth consecutive year. However last year some select US firms felt out of synch with the market and paid surprise spring bonuses (effectively doubling their bonus earnings for the year) in response to market buoyancy. This may be used again as a tool in the future for firms to catch up with market remuneration. As the recruitment market has recovered post-recession, we have also seen the following: reintroduction of retention bonuses by some firms, whereby an employee is tied in for a 12 month period a return to sign on bonuses for excellent candidates in buoyant areas relocation packages offered to overseas candidates in sought after areas of law Flexible benefits A large number of firms provide flexible benefits packages (e.g. buying and selling extra holiday entitlement) as well as flexible hours and working from home arrangements. 9
10 Other common benefits Pensions (either contributory or non-contributory) the average contribution is 5% of annual salary, although some firms offer up to 10%, and you can choose to increase your personal contribution as a salary sacrifice Holidays - in larger firms days per annum (increasing with service) is the minimum expected by lawyers. The ability to buy up to 5 days extra holiday is becoming increasingly common. Some firms will also include additional discretionary holidays (for birthdays or at Christmas) Private medical insurance and dental care Mobile phone / blackberry Subsidised gym membership Life assurance Permanent health insurance Enhanced maternity pay Season ticket loan Interest free study loan Subsidised canteen Concierge service for home deliveries and repairs Childcare vouchers Health screens Corporate gym membership Free legal services Lifestyle management courses Counselling Car allowance (less common in private practice) 10
11 For any further information, please contact our UK private practice team: Lynne McCarroll Jon Garrett Deborah Adkins Jamima Rey Sarah Livesey Katherine Jones Jared Glazier gmk Chancery Lane, London WC2A 1PP T F E info@gmk-legal.co.uk 11
12 Chancery Lane London WC2A 1PP Tel:
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