Inflation in the UK is now well into double figures. Due to a severe shortage of legal talent, lawyers’ salaries have reached record-breaking levels at all leading law firms, with city firm Akin Gump setting an NQ salary high of £180,000.
The lack of good-quality lawyers available has also been exacerbated by many internationally qualified solicitors returning home in the pandemic as well as post-Brexit, with only a trickle starting to return this year. Market forces in these conditions are difficult to stop, and almost inevitably, the lack of talent has pushed salary levels 30% higher than the previously established market level for newly qualified lawyers.
Of the five Magic Circle firms, Freshfields Bruckhaus Deringer and Clifford Chance have announced 25% pay rises to £125,000 for new graduates, and Slaughter & May has offered a more modest 7% rise to £115,000, while Linklaters and Allen & Overy have held firm at £107,500.
Regional law firms have joined the trend, with DLA Piper pushing regional NQ salaries up to £65,000 and Simmons & Simmons to £68,000, a rise of 22%, driving rivals to follow suit in order to stay competitive.
Most of these raises are far higher than inflation, currently sitting at 10.7%, and come after employees were discouraged from asking for a raise during the cost-of-living crisis. With the average UK salary at £38,131, and most salaries not rising in line with inflation, law firms have been criticised for handing such huge salaries to youngsters at the start of their careers.
This trend has hit all levels of law firms, with the West End, Boutique and the High Street feeling the rise. The percentage of rise in NQ salaries are now at a 20% hike due to the lack of talent coming up from the ranks.
At the same time, more established lawyers are suffering wage stagnation, leading them to feel undervalued by comparison–which means firms that offer massive raises to win fresh blood may lose more experienced talent.
Another argument is that these raises are unsustainable. DWF chairman Sir Nigel Knowles said, “Offering more and more money to young people is only a sticking plaster. It is not a sincere, sustainable or healthy solution for anyone.” He called on law firms to focus on wellbeing and work-life balance, rather than money, as their main weapons in the talent war.
The problem with all this record-breaking uncharted salary territory is knowing what will happen when these salary wars inevitably finish. Will it result in a severe market correction in the other direction, with salary band levels ultimately falling back? Will it force employers to consider headcount reductions to manage costs? Or will the uncertain salary turbulence create extreme and unpredictable pay ranges, with market winners and losers at opposite ends of the salary spectrum?
Tax cuts, borrowing, and higher spending will directly impact all our lives in different forms, regardless of who wins. The plunging market after the fateful “mini budget” has created unprecedented woes for the financial and political climate of the country.
2022 has seen a strong demand for lawyers within the legal private practice market. The market has been particularly strong at the junior and mid-level for all commercial, corporate, employment and property lawyers. The higher salaries in law firms, however, have caused discomfort amongst many companies who are unable to increase salaries to acquire lawyers with the required expertise. Getting approval for exceptionally high salaries in-house can be a highly sensitive issue, and breaking pay grades is never taken lightly.
Below in-house work, private practice and in-house lawyers juggling multiple in-house offers has been commonplace in 2022, with those clients demanding 4-5 days in the office struggling to fill their roles. For those companies, industries and CEOs that continue to insist on office attendance for their businesses, I expect peer pressure and dwindling staff numbers will no doubt ultimately force change. This irreversible structural change within the workplace has been a positive consequence of the pandemic.
If you are a hiring manager for a law firm, or a candidate wondering what your skills are worth in the current market, contact us today for personalised expert advice.