London's associate pay divide deepens after US firm salary hikes

Milbank kicked off the latest round of US associate salary increases last week, with McDermott following suit and Quinn Emanuel raising the stakes further in London.

The firm was once again the first mover, pushing associate salaries up the “Cravath scale”, the benchmark pay structure followed by most top US firms.

While Cravath has historically been the first to announce and set the scale, Milbank has taken that role in several recent cycles, including this year.

Milbank associates in the US will now be paid between $235,000 and $455,000 depending on seniority, with the increase understood to also be reflected for London associates through the firm's compensation model.

The raises come after another strong financial year for elite US firms and have been widely anticipated by associates. The scale was last updated at the end of 2023, with many commenters on Reddit quick to point out that the latest increases in fact lag inflation.

Max Campbell, a New York-based legal headhunter, said the reaction among associates has broadly fallen into two camps: "happiness that salaries are increasing, and discontent that the raise did not come sooner and isn't larger".

Campbell said expectations have also been influenced by the special "summer bonuses" many firms have awarded in recent years. Without a similar bonus round this year, some associates may view the latest increases as less generous than they first appear.

London impact

While the latest increases originate in New York, the impact is likely to be felt in London, where US firms continue to compete aggressively for talent and pull away from their UK rivals on pay.

Nathan Peart, executive director for the associate practice group at legal recruiter Major, Lindsey & Africa, feels increases have been a long time coming.

"NQ salaries have remained stagnant for two years, while inflation and billing rates have risen significantly - this has created pressure for compensation to realign with market conditions.”

McDermott quickly announced it would match Milbank, with its London lawyers understood to be in line for an equivalent raise. Quinn Emanuel then went a step further, first matching the new US scale before raising London NQ salaries to a market-topping £189,000.

The litigation powerhouse maintains its own salary scale in London, giving it flexibility to stretch its rates comfortably beyond the Cravath scale levels. The London hike puts it £9,000 ahead of the previous top-of-market rate it shared with Davis Polk, Gibson Dunn, Willkie and Paul Weiss.

The widening gap

The next question is whether other firms in London will follow.

"I wouldn't be surprised to see other members of the £180k NQ club follow suit," said Ria Karnik, managing director of associate recruiting at Major, Lindsey & Africa.

In London, US firms already dominate the top end of the salary market. Until Quinn's announcement, the highest-paying firms were all American and paid newly qualified lawyers £180,000.

The highest-paying major UK firms, by contrast, remain at £150,000 - the rate which the Magic Circle has followed since base salaries were last raised in 2024.

"The move will also up the ante on the Magic Circle," Karnik said.

"Eyes will begin to fall on the increasingly glaring pay discrepancy at this level, which sits around £40k. If this does prompt a fresh NQ pay war, we could expect movement across the whole market."

Whether Magic Circle firms choose to respond remains to be seen. But each new round of US salary increases further highlights the growing divide between the compensation models of elite US firms and their UK counterparts.

Pressure may also build further up the associate ranks, where relatively small pay gaps between junior and more senior lawyers have been a source of frustration in recent years.

"As pay rises from below, those in mid-level associate and senior associate roles could easily be troubled by the numbers they are seeing," Karnik said.

“If you are being paid £115,000 as an NQ, but a fourth year is on £130,000, that's where frustration kicks in.”

What associates care about

Base salaries aren’t everything. Karnik says that at many Magic Circle firms, bonuses are a powerful tool for retaining lawyers.

"At the junior level, the Magic Circle really does keep pace by virtue of how that bonus can work. It could pretty much make you whole in some instances."

Recruiters also caution against assuming every associate wants to move to a US firm.

"Not everybody is well aligned to how a US firm operates because it is a lean team culture," Karnik explained.

"You have to be very willing to work in an environment which could just be you, a junior associate and a partner on a matter. It's not a resilience thing, it's a personality trait. You have to be the type of person that thrives in that environment."

Still, for associates weighing up a move, the latest salary increases serve as another reminder of the premium US firms are willing to pay.

And with Quinn Emanuel now setting a new benchmark in London, attention is likely to turn to whether the rest of the market feels compelled to respond.

Post-merger gaps

The latest pay hikes have also heightened focus on a growing issue in transatlantic mergers: what happens when associates from two firms are brought together on different pay systems.

Some London associates may remain on Cravath-level salaries, while colleagues sitting a few desks away under the same combined firm office are paid significantly less.

Last week, Law.com reported that Cadwalader associates in London are expected to remain on the Cravath scale following the firm’s merger with Hogan Lovells. Hogan Lovells associates, meanwhile, will continue to be paid under the firm’s existing London compensation model.

That leaves a visible gap. Cadwalader first-year associates in London currently earn around £170,000, while NQs at Hogan Lovells are paid £140,000.

Ashurst's upcoming merger with Perkins Coie could create a similar dynamic. The US firm pays the Cravath scale in London, while Ashurst currently pays newly qualified lawyers £140,000.