A&O Shearman Ups Junior UK Lawyer Salaries, Bowing to Pressure

A&O Shearman is boosting pay for newly qualified lawyers in London, following similar moves by its Magic Circle rivals.

The firm will pay junior lawyers £150,000 ($188,000), up from £125,000 ($157,000), A&O Shearman said Friday.

The firm was formed in the recent combination of Allen & Overy and Shearman & Sterling. It had previously stuck to the lower rate Allen & Overy paid London NQs, even though Shearman & Sterling had paid its new London lawyers £145,000 ($185,000).

A&O Shearman changed course in response to moves by key rivals Freshfields Bruckhaus Deringer, Linklaters, and Clifford Chance to raise their rates to £150,000.

Newly qualified attorneys are the London equivalent of a first-year associate.

Trainee salaries have also increased at A&O Shearman, to £56,000 ($71,000) from £50,000 ($63,000) for first-year trainees, and to £61,000 ($77,000) from £55,000 ($70,000) for second years.

The ongoing pay war for talent across all levels in the London market reveals stark differences between what UK and US firms are able to offer new recruits, or how they hold onto venerated talent.

The increases mean that A&O Shearman and its Magic Circle competitor firms pay now about 12% to 15% less than US operations, an improvement from a previous gap of 35% to 40%, amid fierce competition.

The group’s increases will also lead to other UK firms raising rates, according to Macrae partner Siobhán Lewington.

“This is not a surprise at all. Speaking to law firm leaders, I think others will follow and there will be a knock-on effect across the market,” she said.

The May 1 merger of Allen & Overy and Shearman & Sterling created the world’s fourth-largest law firm, with $3.5 billion in annual revenue and 4,000 lawyers.

“Our compensation structure gives us flexibility to reward expertise, performance and wider contribution and is designed to be highly competitive to reflect the markets in which we operate,” A&O Shearman London managing partner Denise Gibson said in a statement.