Money doesn't necessarily buy job satisfaction. But if a law firm pays below market rate, chances are you'll soon see lawyers voting with their feet. ALB looks at salary trends across key Asian markets.
What am I worth? That's the question every lawyer asks when reassessing their job. In a market where "growth" and "boom" and are the buzz words, it's easy to get the impression that lawyer salaries are sky-rocketing. But what's actually happening out there?
Generally the trend in Hong Kong has been one of steady rises across the board, says Florence Pang, a Senior Consultant with Hudson Recruitment. Pang says that for international firms, the average rise in 2007 would have been over 10%.
2007 saw some dramatic salary hikes too, but Pang noted that these tended to occur in specific areas of specialisation, with corporate finance and capital markets expertise most in demand. "In those markets, I've seen increases of over 30%, although I would say the norm is about 15%," says Pang.
The market in China is similarly strong, with firms upping the ante to attract the right talent. One salary survey estimated salary growth in top tier domestic firms to be as high as 19% - thereby narrowing the gap with international firms.
"Certainly there is an upward pressure on salaries," says Scott Guan, co-managing partner of J&F PRC Lawyers. "We've increased associate compensation significantly since mid last year, and in addition we have adopted an incentive plan so that associates with quality performance will get a good bonus, which can be up to 8 to 10 months of salary." Guan says that the incentive scheme, together with a clear partnership track, has been a very successful part of the firm's recruitment and retention strategy.
These salary trends have implications right across Asia too as younger lawyers relocate to cities where more lucrative remuneration is on offer. Take Malaysia, for example. "We're definitely experiencing a brain drain," says Siew Ling Su, partner at Kuala Lumpur-based firm Tay & Partners, "The general sentiment among law firms is that there are fewer good candidates to choose from." And as the law of supply and demand dictates, salary rises necessarily follow. "Some firms are having to increase salaries by between 10 to 20%," says Su.
The consensus around Australian firms, which have lured their fair share of lawyers down under, is that there is still a net loss of lawyers overseas. Susan Ferrier, Director of People and Performance at Allens Arthur Robinson, says that there is a particular trend for two to five year lawyers in particular to seek a stint overseas. New York and London have traditionally been popular with Australian lawyers, but the lure of the increasingly lucrative Asian markets is strengthening.
The demand for in-house counsel has been a source of competition for law firms in recent years. "We regularly get calls from recruiters trying to fill in-house corporate roles," says Irene Yang, partner at Guangdong Guangda Law Firm. Yang says that recruiters are seeking to fill roles in Shanghai, Hong Kong and Singapore.
However, lawyers who make the transition across to in-house teams aren't necessarily copping the pay cut that has often accompanied such a move in the past. "Increasingly companies are able to attract lawyers to in-house teams with salaries comparable to those on offer in law firms," says Pang, "In-house roles are always attractive to lawyers because of the work-life balance and the chance to get away from the billings pressure of a big firm." The opportunity to earn a large bonus is a major factor too. "For lawyers going in-house with an investment bank, the bonus will often more than compensate for any loss in base salary," says Pang.
Closing the gap
Over in the Australian market, the demand for senior associates has resulted in a narrowing of the salary gap between senior associates and salaried partners. But the same trend hasn't appeared in Hong Kong.
"There hasn't really been any significant narrowing of the salary gap between senior associates and salaried partners," says one industry source, "That's one of the reasons why senior associates are attracted to the in-house market, because corporates and banks can take advantage of that gap to attract talent." The source says the uncertainty surrounding when and indeed if a senior associate might attain partnership adds to the attraction of moving in-house.
Florence Pang agrees, "Certainly the gap hasn't narrowed significantly." Pang notes that the lawyers who are particularly in demand are not necessarily senior associates, but lawyers in the 3 to 5 QPE bracket. "Lawyers in that range are relatively mature technically and their salary expectation is more manageable."
In Singapore, some - but not all - of these trends are apparent. "There hasn't been a stellar increase in salary levels, but certainly firms have been willing to pay more for the right person," says Jeremy Small, Director of Law Alliance Recruitment Singapore. Small estimates that the average salary increase last year would have been about 10 to 15%, albeit with a lot of fluctuation from firm to firm.
Small says that there is an overlap between senior associate salary and salaried partners in some firms, although not in Magic Circle or US firms. However, he says that this is explained by historical and local factors, "In a lot of firms you'll see quite a conservative level of partnership, with senior associates who have been there up to 15 years but are unable to make partner. It's a particular issue for New York law firms, who make very few partners outside of New York."
The result, says Small, is senior associates being paid at the very top end of the scale. "I've even seen some instances of senior associates taking a pay cut when they attain partnership."
Small also attributes the smaller gap between senior associate and salaried partner to the opportunities on offer in Singapore, "Compared to the Hong Kong market, there are less opportunities for frustrated senior associates to go elsewhere. Singapore is a growing market with some opportunities to go in-house, but not necessarily at the same salary levels to which international lawyers would be accustomed.
There are mixed signals for salary trends in the future. A report by recruitment firm Michael Page is predicting more of the same, with private practice salaries in Hong Kong to rise between 7% to 11% over the year in top tier firms, with rises of up to 20% for in-demand skill sets. The report also forecast that that in-house salaries would also be on the move, with 8 to 15% rises over the next twelve months.
However, Florence Pang is more cautious with her predictions, "Law firm business is driven mainly by financial activity. My prediction is that salary over the next year will stabilise somewhat because of the uncertainty created by the US subprime crisis. A lot of people are waiting to see what the real picture will be."
A lot of firms are echoing this cautious approach, although noone can afford to fall out of step with salary trends just yet. "Our pipeline [of work] is still pretty good," said Susan Ferrier, "We're not changing tack yet, but we're certainly keeping a close eye on the situation."