US law firms have launched an expensive bidding war for young legal talent after New York-based Milbank Tweed Hadley & McCloy raised the salary it was offering first-year lawyers to $190,000, forcing their competitors to follow suit.
The $10,000 increase for new starters by Milbank, which also raised salaries for those just below partner level to $330,000, took effect this month. The move was followed by several other leading US firms, including Cravath Swaine & Moore, which normally sets the salary bar — as it did when it sparked a similar pay war two years ago.
Cravath has gone even further for associates with four years' experience and above, as well as doling out special bonuses. Simpson Thacher & Bartlett was the first to match Milbank's rates, adding summer bonuses of up to $25,000.
One managing partner said he expected to see the top 20 US firms match Milbank's move by the end of the month.
So far, Weil Gotshal &Manges, Kirkland & Ellis and Skadden Arps have matched the “Cravath scale”, while Quinn Emanuel has followed suit in all its offices except London, where it pays in sterling “at or around the top of the market”.
Alan Olson, of the US legal consultancy Altman Weil, said the salary war “may be sustainable by some firms for a period” but fierce competition among firms would eventually put pressure on both fees and compensation.
However, Scott Edelman, chairman of Milbank, said the rises were sustainable for firms that had done well over the past four years.
“For sophisticated, sensitive, bet-your-company litigation or transactions . . . you want the best, you want it done right away, by people with a special work ethic and special skills,” he said. June's pay wars look like leaving behind the leading UK firms, which were slow to react to the 2016 round of US salary raises.
First-year lawyers at London “magic circle” firms such as Linklaters and Clifford Chance earn the equivalent of about $120,000.
Yesterday Clifford Chance said that it would match the Cravath scale — though only for US-based associates. “There has been something of a brain drain [from UK] to US firms — not only at partner level, where US profits are often much higher, but also for associates,” said Freddie Lawson, of legal recruitment firm Fox Rodney Search.
“There's a real fight for those guys.” The pay bonanza reflects the general financial might of US law firms, described as “red in tooth and claw”.