Allen & Overy (A&O) has ditched its firm-wide bonus scheme as part of a major pay shake-up that will hike London associates’ pay by 15% and create a new bonus scheme tied to equity partner profits.
The measures, which come into effect from 1 November, will see the London office introduce a performance-related bonus for associates, which will mirror the partner points system under the lockstep.
Senior associates will be eligible for a bonus payment equivalent to up to two equity points in a year, with junior associates in line for one point. The value of one point last year was £24,008.
The bonus scheme will apply to all associates over one year of qualification. Newly-qualified and one year PQE associates will get a flat-rate bonus assessed by the firm depending on its performance.
However, in a measure designed to improve associate retention, bonus payments under the new scheme will not be paid out for 15 months.
The firm has also introduced a new senior associate role, which covers all associates at five years’ qualification and ushers in completely merit-based pay. The move effectively abolishes the traditional assistant ‘lockstep’ system, which set pay bands based on years of qualification, for senior associates.
However, junior lawyers can look forward to 15% rises across the board, making the firm the highest paying City practice. Newly-qualified pay will rise from November from its current level of £55,000 to £63,300. One year PQE associates will receive £69,000, two year PQE £80,500 and three year PQE £88,600.
The news comes following the firm’s announcement in March that it was to hand out 50% of its annual bonuses on the basis of merit from next year, as it moved to reward high performers.
However, the firm today (12 October) announced that this measure has been shelved in favour of locally-based awards, a move regarded as a clear attempt to target resources towards the ultra competitive City recruitment market.
In particular, A&O is hoping to improve assistant morale in its core banking practice, which has suffered from high attrition in recent years.
The shake-up also comes alongside the introduction of new role of ‘counsel’, which as an alternative to partnership, an expanded assessment regime for assistant, and a career management programme.
A&O managing partner David Morley said: “We recognise that we need to offer associates different options in their careers with us and we believe everyone deserves to be appropriately recognised for their individual performance contribution. There is a real challenge in London for all the major firms to attract great people — and we believe our announcements today will enable us to do that.”
The package will be watched closely by rivals at a time of fierce competition for talented young lawyers, increasing the chance of major pay hikes from rival City practices.
Talkback: A&O’s pay shake-up: rewarding talent or short-term panic?
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A&O rips up firm-wide bonus to target City associates; NQs get £63,300; associate lockstep scrapped at five years
Published: 12/10/2006 00:00
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