By: AJ Chambers | 25 October, 2022

Salary bunching in law firms

Can we take a moment to talk about salaries? Specifically, salary bunching. When deciding where to train, or deciding on an NQ position, many aspiring and training solicitors are lured in by high NQ salaries. Who can blame them.

However, NQ salaries alone are not necessarily a good indication of future earning potential.

Whilst most law firms disclose their NQ starting salaries, future earning potential is sometimes kept under wraps. Even for recruiters, it can be difficult to get a clear answer on salary bandings and how they equate to certain PQE levels.

 “The salary is flexible and dependent on the individual”, is a phrase we come across most from clients in our industry.

However, through our market knowledge we do have a pretty clear grasp on the market rate. Earlier in the year, Legal Cheek opened a forum in which solicitors disclosed the salary bandings at their current firms. Providing never-before-seen insight into the pay structures of London law firms.

While we are unable to validate the data contained in that forum, it did confirm something we had already suspected.

Salary bunching is real and as Legal Cheek termed it, “the unspoken effect of the war on talent”.

What is salary bunching?

Salary bunching refers to the pay structure of a firm or company. Where employees do not necessarily see pay rises in line with their increased experience.

For example, one individual mentioned that an international law firm was paying its NQ solicitors £95k, its 1 PQE solicitors £96k, £98k for those with 2 PQE and £101k for those with 3.

As an NQ (or aspiring solicitor) a £10k increase in salary over a 3 to 4 year time period, is not necessarily what you would expect given the flashy NQ figures.

What is driving this trend?

The war on talent is unrelenting. When ‘Biglaw’ US firms entered the UK legal market, they set salaries soaring with some NQ solicitors being offered pay packets above and beyond £150,000 p.a.

This puts the rest of the market in a quandary. Lawyers at US firms are not necessarily working longer hours than those lawyers within Magic Circle firms. But they are in some cases earning £50k more than their counterparts.

To try to stop a mass exodus, Magic Circle and other elite UK-based firms have had to increase salaries to attract young talent. This sparks a chain reaction and soon all law firms are upping salaries in order to compete.

The problem comes when NQ salary pay increases are not replicated to the same extent as those with more experience.

This is not to say that more experienced lawyers are not benefiting from raises in pay. But in most cases, their increases are watered down.

When will this bubble burst?

Many consider the huge pay increases we are currently seeing at the junior end of the market to be unsustainable.

The more firms pay their lawyers, the more money the firm has to earn. Cost is inevitably going to be passed to clients who will end up paying more for the same level of service.

Reluctant to fall too far behind, salary bunching may be one way that firms have tried to balance this issue. If they can get away with paying a 3 PQE only £6k more than an NQ, why wouldn’t they?

Many suggest that the salary growth bubble will burst within the next couple of years. I suspect they are right.

Allen & Overy and Linklaters both made waves when they announced earlier this year that they were bucking the trend and were not going to rush to match others’ NQ rates, deciding instead to “consider the impact of any changes in the wider economic context”.

It saw them fall behind the rest of their Magic Circle counterparts and provoked unrest among some of their trainee cohorts.

Something tells me that it will not be long before other firms are forced to join them and hold steady.

Article by Shannon Aldis, who works on our London Law desk. If you would like to work with Shannon on any talent or vacancy searches, please contact:

Our Awards

Global Recruiter 2021 Awards
Business Awards 2023
Essex Business Awards 2022
The Global Recruiter Awards 2022
GR Industry Awards 2022