A US law firm in London is handing out £36,000 bonuses to junior solicitors who successfully refer recruits to the practice.
In the latest escalation to the pay and benefit wars raging among Square Mile legal practices, The Times has been told that Ropes & Gray is roughly matching the bonuses being offered for referrals by top law firms at their offices in the United States.
A report in the Financial Times this week noted that at least two firms in the US were offering $50,000 (£38,000) to lawyers who refer individuals who are ultimately taken on. The report said that for the past three years, the US law firm Goodwin had offered associate referral bonuses of $30,000 in its offices outside America and $50,000 inside.
Referral bonuses have been a longstanding practice at City law firms but the amounts have historically been much lower.
A source with detailed knowledge of law firm recruitment in the City said that Ropes & Gray was paying £36,000 bonuses. The firm did not respond to a request for comment.
Neither A&O Shearman or Kirkland & Ellis, two other US law firms, confirmed whether the referral bonuses were available to their associate solicitors in the City.
Rapidly escalating referral bonuses come at a time when starting salaries for newly qualified solicitors have rocketed to a peak of £180,000 at some US firms in London.
“Paying bonuses to associates who introduce others is not new and firms have had such arrangements in place for many years, although it has never been at this level before,” said Tony Williams, a former managing partner of one of the City’s “magic circle” law firms, who now runs a legal profession consultancy.
Williams added that law firm managers perceived the benefit to be that associates were likely to introduce candidates they believed were appropriate, “as they are in effect endorsing them and it will avoid the use of external recruiters”.
Chris Clark, a director of Definitum, the lawyer headhunting agency, said that historically City law firm referral bonuses ran to between £5,000 and £20,000, with even the high end being significantly less than a recruitment fee.
Clark said that in some cases associates would offer to share the bonus with the individual referred to the firm. “It’s a great incentive,” he said, before adding that a full “recruitment process is competitive and time-consuming, and lateral associates who want to move to a top-tier firm will require guidance and preparation, which won’t come from a friend who simply opens the door”.
Williams also highlighted a potential detrimental side effect of paying referral bonuses: “If used exclusively, it can have an adverse impact on the diversity of candidates employed, as the associate is more likely to introduce candidates from the same social and ethnic background as the associate.”