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London law firm partner compensation 2011

 

 

In the UK very few commercial law firms now operate as full equity partnerships. Most have an increasing number of partners who, although they may be styled “fixed share equity” or “junior equity”, are not full equity partners. In between full equity partnership and salaried partnership, UK law firms have a host of partner gradations{1}. For the purpose of determining compensation we have divided our summary into “full equity” and “non-equity/salaried partner” compensation.

 

 

Equity partner compensation in UK and US law firms in London

 

Broad equity partner compensation figures are relatively easy to obtain for both UK and US law firms.

  

UK firms

In the UK, the legal press such as Legal Business and The Lawyer publish detailed information on equity partner compensation for the top 100 UK firms each year in September. They include figures for the equity spread (the range between the bottom and top of equity) and the all important prestige headline figure of profit per equity partner (PEP) for each firm.  In general, the narrower the equity spread the more accurately an individual equity partner’s compensation can be determined.  Nevertheless, it is appropriate to record that these guides are not always 100% accurate.

 

 

In 2010, the average (mean) compensation for equity partners in the top 50 UK law firms was £524,500{2}.

 

 

US Law firms

The AmLaw 200 provides the PEP of the top 200 US law firms but, unlike its UK equivalents, it does not provide the equity spread for individual law firms.  For the UK offices of US law firms the situation is further complicated because often the US firm operates a separate equity partnership in the US to that which it operates in the UK.  In such cases UK “equity” partners may be equity partners in the US entity (sharing in the worldwide profit pool) as well as the UK entity, or they may be equity partners in just the UK entity (thus limited to sharing in the profits of the UK partnership alone).  If the UK based partners are not also equity partners in the US LLP, then knowing the US firm’s published AmLaw PEP is a particularly blunt method of determining UK based partner compensation, as the PEP between the UK and US entity of the same firm can vary significantly.  

 

 

Because partnership structures and equity spreads vary so significantly from firm to firm, knowing a firm’s PEP is not usually that helpful in determining the actual compensation paid to a given equity partner; moreover, it is rare to find an equity partner whose compensation corresponds closely with their firm’s reported PEP.  That being said, law firms with higher PEP will generally pay their equivalent equity partners proportionally more. 

 

 

Non-equity/salaried partner compensation in law firms in London

 

Top 100 UK law firms’ non-equity/salaried partner compensation can also vary widely even between partners at the same firm. It is not uncommon to find salaried partners with compensation in excess of that of full equity partners. The 2010 PricewaterhouseCoopers (PWC) Law Firms’ Survey (based on 80 law firm responses to a survey of the top 100 UK firms for the financial year ending April 2010), indicated that in 2009/2010 salaried non-equity partner compensation in London fell significantly. The report stated that the top 10 UK firms saw a drop of 6.8% (from an average of £259,000 to £242,000) and the top 11-25 UK firms saw a drop of 9.4% (from an average of £170,000 to £154,000). The PWC report is published in September each year but the compensation figures are always historic as they review the figures up to the UK financial year end in April.  Since April 2010 it is our view that salaried partner compensation has risen slightly.

 

 

Historically, US law firms in London have often paid more to their UK qualified associates than have UK City firms.  At partner level this differential is reduced or eliminated particularly in relation to UK firms paying Premier City Rates{3}.  It is of course a gross oversimplification to bunch all US firms operating in the UK into one banding as there is a huge differential between them.

 

 

For some US firms the title “Counsel”, with its various semantic variations, is synonymous with salaried partner.  Whilst this remains the case at a number of firms (with some Counsel even having voting rights) the recent proliferation of similarly styled titles in UK or merged UK/US firms has made this title much harder for candidate lawyers to value.       

 

 

 

Non-equity/salaried partner 

Range

Typical

Premier City Rates

£180,000-£360,000+

£250,000

Mid-Market London Rates{4}

£125,000-£260,000

£160,000

West End/Mid-Town Rates{5}       

£75,000-£200,000

£125,000

US firms

£150,000-£400,000

£220,000

“Counsel” - Premier City Rates firm

£130,000-£190,000+     

£150,000

“Counsel” - US firms

£150,000-£260,000        

£165,000

 

                                                                                                                               

As ever with salary summaries there will be examples of compensation which do not fit into the categories above. Where such figures overtly distort the average we have excluded them.  Edwards Gibson will be happy to provide more bespoke information upon request.

 

 

©Edwards Gibson 2011

 


{1} The PWC Annual Law Firms’ Survey lists partner levels below full equity as: “fixed share equity”, “non-equity”, “fixed-share” and “salaried”.

{2} Legal Week, 15 July 2010.

{3} Premier City Rate paying firms include magic circle and some of the top 15 UK practices in London.  It also includes some merged US/UK firms.

{4} Mid-Market London Rates covers rates paid by most full service City firms as well as the London offices of most national firms.

{5} West End/ Mid-Town Rates cover some of the smaller full-service firms which are predominately located outside of the City square mile.

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Articles by Kristi Edwards

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