The Background

The war for talent is not a new phenomenon and has long been a topic of discussion, but the hiring spree by Paul Weiss has highlighted it as a key issue in the legal market. Namely, the New York headquartered White Shoe giant has been making waves in London by aggressively hiring top lawyers from elite City firms, including a significant team from Kirkland & Ellis, to build an elite private equity (PE) practice. Since launching its English law practice, Paul Weiss has quickly grown to c.140 lawyers in London, including 12 partners from Kirkland, and continues to expand. The firm’s hiring spree is motivated by a desire to provide a strong London presence for its PE clients, such as Apollo, Bain Capital, and KKR. Paul Weiss is reportedly offering highly lucrative compensation packages, which has also intensified salary competition among City law firms. While some question whether such rapid, high-value lateral hiring is sustainable, early signs suggest strong momentum and interest from potential recruits.

Meanwhile, Kirkland, known for its dominance in the PE sector, has been facing challenges due to the high-profile exits to Paul Weiss. Partners Neel Sachdev and Roger Johnson, who were instrumental in building Kirkland’s London presence, left amid alleged dissatisfaction with the firm’s direction and management style. However, Kirkland has responded by making its own strategic hires to bolster its London office and maintain its market leadership. Despite losing talent to Paul Weiss, Kirkland remains a powerhouse, with revenues growing significantly in recent years. The firm’s strategy focuses on maintaining a deep bench of partners and a diversified client base to weather market changes. While Paul Weiss aims to build a smaller, elite team that emphasises culture and quality, Kirkland’s approach prioritises breadth and depth to support large-scale PE operations.

Increasing Salaries

This fierce competition for talent has been driving up salaries for newly qualified (NQ) lawyers to unprecedented levels. Some junior lawyers in London are now earning more than the UK Prime Minister, with salaries expected to surpass £200,000 a year soon. Top US firms in London such as Paul Weiss, Gibson Dunn, and Quinn Emanuel have raised salaries to as much as £180,000, while UK-based Magic Circle firms offer up to £150,000. The intense salary competition is fuelled by booming private equity dealmaking and lucrative litigation work. US firms, with deeper pockets, dominate this war for talent, causing concern among UK firms as they risk losing lawyers to American competitors for better pay with only slightly increased workloads.

While these salary increases may seem like a positive development for associates, the high pay offered to NQs has caused frustration among more experienced associates who might earn only slightly more. The term “compression” is being reluctantly whispered by managing partners at City law firms. This term refers to the practice of paying NQ solicitors a substantial amount while failing to proportionately raise the salaries of lawyers with up to six years’ experience. Commentators warn that these salary hikes could not only unbalance financial stability but also foster resentment and division among the senior associate solicitors at firms which have hiked their NQ salaries and seemingly forgotten others.

Doing Things Differently

Given many firms’ inability to compete on the financial side, they are trailing other methods to attract talent. For example, Pinsent Masons is trialling compressed workweek, allowing employees to finish early on Fridays without a pay cut, provided client, team, and work commitments are met. This trial, taking place across the firm’s UK, Europe, and Middle East offices, enables staff to work their standard weekly hours by Friday lunchtime. The firm will evaluate the trial’s success after a month and potentially expand it to other offices in 2025. Managing Partner Laura Cameron emphasises the firm’s commitment to flexible, innovative working practices that balance business needs with employees’ personal lives. Unlike other firms, Pinsent Masons’ scheme does not involve a pay cut or extra hours earlier in the week, but early finishes depend on workload and client demands.

Pinsent Masons is also trialling a new system to alert management when lawyers risk burnout due to excessive work hours. This initiative is part of broader wellbeing measures following the death of a partner who experienced a severe mental health crisis. The system tracks the hours logged by lawyers and staff, flagging consistently high hours to management. This move aims to improve workload management and prevent overwork. However, it will be interesting to see whether these kinds of efforts will trump the remuneration and other financial benefits offered by these top law firms. One of the major incentives for associates at these firms is the referral fees on offer. For example, top U.S. law firms are now offering substantial referral bonuses of up to $50,000 to junior lawyers who bring in new associates. These types of incentives, alongside NQ salary increases, are a major sign underscoring the fierce competition for talent in the legal sector. Firms such as Kirkland & Ellis, A&O Shearman, Goodwin, and Paul Weiss have introduced these bonuses to attract young lawyers amid a boom in dealmaking. This marks a significant jump from the previous standard of around $25,000.

In comparison, UK law firms (Including the Magic Circle firms), offer lower referral bonuses which are about £15,000 for successful hires. Although the majority of the Magic Circle firms have increased the salaries for junior lawyers to stay competitive with their U.S. rivals, there is a visible trend of associates moving from UK to US law firms in London. Lower-tier firms tend to offer smaller referral bonuses, often around £5,000, according to insiders familiar with individual firm practices. Similarly, the rise in referral and retention bonuses reflects the intensifying “war for talent” in the legal industry. Retention bonuses are typically offered by firms experiencing significant departures, such as the loss of a key partner from a team. These bonuses are paid to associates to encourage them to stay, a strategy that often proves effective and gives the firm time to fill the gaps left by those who have left. Meanwhile, sign-on bonuses, although not unheard of, are less common in the current firm-driven market. These bonuses were much more prevalent during the post-Covid hiring boom when a surge in work required firms to hire aggressively, and top candidates often had multiple firms competing for them.

While non-financial incentives may attract some individuals to join or stay with a firm, research indicates that pay rises are the primary reason lawyers switch firms, with 56% of the 338 respondents who changed firms in the past year citing better pay as their motivation—a 20% increase from the previous year. The study highlighted the impact of a tight talent market and cost-of-living pressures on hiring, emphasising the importance of competitive salaries. Other reasons include dissatisfaction in current roles (34%), seeking greater flexibility (32%), unmanageable workloads, and limited career progression. Flexibility, particularly the ability to work from home, has become increasingly valued, with 90% of respondents highlighting its importance. Law firms that offer three days of remote work weekly are considered above average in the current market. Overall, switching firms can lead to an average salary increase of 15%, and 85% of firms have raised salaries for existing staff by 5-10% in 2023.

Summary Remarks

As the cost of living rises in the UK, along with increasing inflation and interest rates, many high-performing junior associates may be drawn to US law firms that offer significantly higher salaries for a modest increase in workload. With the growing push for employees to return to the office, the differences between firms in terms of non-financial benefits are narrowing, making US firms more attractive due to their higher pay. However, this choice depends on individual priorities, such as the desire to maintain a better work-life balance. For some associates, firms that cannot compete on salary might still offer more appealing options depending on these personal preferences. Ultimately, the decision comes down to what each individual values most. At Halkin, we specialise in supporting lawyers at every stage of their careers, helping them achieve their specific goals—whether that’s progressing towards partnership, enhancing their work-life balance, or relocating internationally. We are keen to engage with commercial associates interested in gaining insights into the legal market beyond their current firm and exploring the best pathways for career advancement.