Salaries: signing-on fees and better benefits as City firms compete with banks, creating an ‘employees’ market’

The market for assistant solicitors heated up considerably in 2005 thanks to a resurgence in mergers and acquisitions (M&A) activity, with some firms resorting to paying ‘signing-on fees’ of up to £15,000 to attract the pick of the candidates, leading recruitment consultants claimed this week. And the trend of increasing competition is set to continue well into 2006, they predicted.


Joanne Street, business manager in Hays Legal’s law firm division in London, said: ‘Around spring last year, the M&A market picked up massively. A surge in activity always has an effect on the investment banks’ recruitment and law firms suffer because they start losing good people.’


Attention is now turning to the annual pay round at large City firms, which traditionally takes place in May each year and can have a ripple effect on the rest of the market.


The impact of magic circle firm Allen & Overy’s announcement in October last year – that lawyers with two years of post-qualification experience would see their basic pay soar from £59,000 to £71,000 this May – will be closely watched.


So far, no other major City firm has followed suit, unlike the previous pay war that took place in 2000 when SJ Berwin hiked rates for its newly qualified lawyers from £33,000 to £42,000.


Ms Street told the Gazette: ‘I am sure there will be movement in May. Two to four years ago, firms were not taking on junior assistants in corporate [and now there is a shortage]. It really is an employees’ market.’


Competition has also increased in the in-house market, and not just in the investment banking sector, according to Taylor Root consultant Sarah Ingwersen.


She said: ‘In 2005, you saw a steady increase in base salaries for lawyers across all areas of commerce and industry. One of the main reasons is companies’ improved profitability and their ability to pass this on in terms of better remuneration packages.


‘[But] companies are also no longer in the position where they can get away with paying lower-than-average salaries. Good candidates have a choice, and companies realise they have to be competitive on salaries – even though it is early in 2006, we are seeing this continue.’


Ms Ingwersen added that companies were finding it more difficult to recruit because law firms had made good strides in resolving some of the issues that previously made many lawyers reject private practice – such as the work/life balance – and move in-house.


Adele Callaghan, director of the north at Hudson, meanwhile reported that increased competition meant that leading regional firms are giving thought to paying a premium to attract good lawyers – even at the most junior level – in practice areas such as corporate, banking, construction and property.


‘The regional commercial practices have also been making a fair amount of headway in getting in strategic lateral hires to fill the gaps in their offerings to clients,’ she suggested. ‘In those areas, remuneration packages [for senior people] are often going beyond typical levels.’