Editors' Blog

All change at New Change

Posted 12/10/2006 by legalweekblogs.com SU

If you haven’t already, take a look at the Talkback thread that is developing off the back of the news that Allen & Overy (A&O) is hiking associate pay by 15% as part of a major overhaul of its pay and reward structure (see story).

Some readers are evidently underwhelmed by the shake-up, while others believe that motherhood and apple pie only exist on Walton mountain. Actually, there is a sense of deja vu about A&O’s announcement today. It performed a similar trick almost exactly a year ago, when it surprised the market by announcing a round of out-of-season pay hikes. At the time the move was seen as a defensive one that reflected attrition problems within the firm’s core finance practice, although, to be fair, it did also herald an end to a four-year pay freeze across the London market. This time around, the firm can justifiably point to the introduction of a far broader package of measures that are designed to help the firm attract and retain good people.

These are the result of an extensive consultation period that has thrown up some genuinely interesting initiatives, such as the option for some fee earners to take a three-year career break. Inevitably, though, the firm will face accusations that the finance department has held a gun to its head. As well as raising pay across the board, it has brought in a discretionary bonus scheme and introduced variable pay for associates with five or more years of post-qualification experience.

No prizes for guessing which departments are most likely to benefit from these changes, which represent a major cultural change for a firm that traditionally set great store by its fixed, firm-wide bonus scheme. A&O’s management team will argue that if you cannot beat the investment banks, you have to join them. The associates who are benefiting from these rises would do well to bear in mind what happens to investment bankers during a downturn.

The obvious risks of such a policy for A&O is that it will create a tier of ‘second-class’ lawyers working in support practices, thereby eroding the firm’s cohesiveness and, ultimately, undermining overall quality. And, of course, if you don’t have lockstep pay for associates, why have it for partners?

john.malpas@legalweek.com