Despite much talk of client pressure on fees the determination to recruit top associates continues to build with one leading New York firm this week jolting the industry by announcing a record pay scale for its US and City associates.
Milbank, Tweed, Hadley & McCloy on Monday (4 June) announced that its associates will earn between $190,000 and $330,000 from 1 July.
In a move that will lead to intense pressure among Wall Street peers to raise the established starting salary for new lawyers from $180,000 to match Milbank, the firm’s associate pay bands will rise between $10,000 and $15,000 depending on seniority.
Touted as ensuring the New York shop offers ‘compensation at the top of the market’, the changes will involve all of the firm’s 500 associates, including 100 in London. Associates in their first to third year will see their salary increase by $10,000, while those from the fourth to eighth will take home $15,000 more.
‘We are fortunate to be doing very well,’ London co-managing partner Julian Stait told Legal Business. ‘Our associates are our greatest asset and we want to recognise their incredible contribution.’
Revenue at Milbank grew 7% to hit $916.54m last year, while profit per equity partner rose 11% to $3.46m, underlining its position among the top 15 Manhattan firms.
Stait denied any concern on the impact on profits: ‘Any cost has an impact to some degree, but we have got very strong profitability, so we expect our profits to hold up. In the medium to long run, the fact that we have such a stellar group of associates is a key part of the reason why we are so profitable. It is an investment in the future.’
Milbank’s salary hike follows the firm’s changes in 2016, prompted by Manhattan leader Cravath, Swaine & Moore’s announcement that it was boosting first year associates’ pay by $20,000, to $180,000.
Though there has been some expectations that 2018 would go without further rises at top global firms, Milbank’s move promises to further heat up City salaries, with many leading US firms benchmarking their London teams to domestic pay scales.
Such a move would further widen the gap between leading US firms and City counterparts. For comparison, Allen & Overy and Clifford Chance both increased their bands for junior lawyers 3% with newly-qualified (NQ) solicitors earning £81,000.
Such dynamics are a reminder that while much of the commercial legal industry is wrestling with far more cost-conscious clients, the highest reaches of the profession operate in an increasingly detached orbit.