How bonus season is testing the power balance between UK and US law firms

Each year-end bonus season now highlights something deeper than annual payouts to hard-working associates: the shifting power dynamics between US and UK firms, and the growing pressure on the UK elite firms as they push harder into the world’s biggest legal market.

Cravath opened this year’s US bonus round with awards of up to $140,000 - the starting gun for market-matching across Big Law. Within days, Clifford Chance, Linklaters and A&O Shearman had matched the scale for their US associates, according to memos seen by Above the Law.

The US push

Clifford Chance, Freshfields, Linklaters and A&O Shearman are all focused on deepening their foothold in the US, the market seen as essential for any firm with global ambitions.

A&O Shearman’s 2024 merger was the biggest structural bet, giving the firm a much bigger US platform overnight. Freshfields, meanwhile, is widely seen as having made the most meaningful cultural and reputational inroads - its New York practice now sees itself competing with the top of the Wall Street elite. Clifford Chance and Linklaters have also expanded laterally in the US.

As these firms push for credibility across the Atlantic, they face a simple reality: competing in the US also means competing on pay.

Different markets - for now

The two jurisdictions have long had different talent and compensation market dynamics.

David Nicol, head of the US practice at legal recruitment firm Marsden, said: "They are radically different markets. If you look at the London market, there’s a huge disparity between salaries with the rise of US firms in the last decade."

US Big Law still sets the benchmark on associate pay - usually led by Cravath or Milbank in recent years - with uniform, seniority-based bonus scales that firms are expected to match. UK firms, by contrast, continue to rely on more opaque, firm-by-firm systems tied to billable-hour targets and practice performance.

Still, the Cravath style of compensation is increasingly influential in London as the markets have grown in parity. Nicol said: "US firms are increasingly paying Cravath-style bonuses in London. A decade or so ago, the firms were essentially satellite offices and now several US firms have UK offices comparable in size and scale to New York offices."

This year, both McDermott and Cadwalader confirmed they will apply the Cravath scale bonuses for London associates, and we are aware of others doing the same.

Nicol said: "The reality is if you want to compete at the top of the market and have growth at the top of the market as an international firm, you have to pay market compensation."

Pressure moves across the Atlantic

The more UK firms prioritise US growth, the more their decisions in America ripple back into London.

If UK firms match Cravath in the US, at what point do their London associates expect the same deal? Many already work similar hours to their US counterparts. Most earn less, while their peers at US firms across the City are getting Cravath rates. The Magic Circle firms pay £150,000 to newly qualified solicitors, around 20% less than the highest-paying US firms in London, and around 15% less than US firms on the Cravath scale.

Freshfields’ leaked 2024 bonus grid showed how the firm is trying to bridge the gap in London. Associates needed to exceed 2,150 hours to unlock the top bonuses which were broadly in line with - or even better than - that year's Cravath scale, assuming the figures translated directly to cash.

The question is whether the current model will hold, or whether we will see a growing number of elite UK firms, those with the strongest US ambitions, start to offer more standardised Cravath-style bonuses to their associates in London.

Competing on culture

One advantage for UK firms in the US is that they're not competing on money alone. Nicol said: "The US is such a competitive market for talent. There’s so many firms and they have to work hard to convey their individual identity. Magic Circle firms have leaned into the softer culture piece."

The perception is echoed in associate feedback: Vault’s review of Magic Circle firms in the US notes that associates say they are more encouraged to take vacations than their counterparts at US Big Law firms and that Magic Circle firms tend to offer a less hard-edged environment. Clifford Chance ranks as the third best firm to work for in the latest Vault rankings.

PE profit engines

There's another difference too: the firms at the top of the pay table tend to have similar business models.

Nicol said: "If you look at the firms that tend to pay the highest rates - the Kirkland's, Simpson Thacher's of the world - their practices are built around private equity and private capital, which tends to be really profitable work. If you’re trying to have a full-service offering, it’s harder than just doing private equity and private capital work."

That goes to the heart of the UK elite’s challenge: the large profitability gap between the Magic Circle and the biggest US firms. Kirkland's most recent PEP was $9.25 million, compared with the sub-$3 million levels at the Magic Circle firms that disclose the figure.

That gap gives US powerhouses a huge financial advantage when it comes to paying six-figure bonuses across entire associate cohorts - something far harder for full-service UK firms to replicate.