Singapore Law Firms Hike Salaries

Came across this Singapore Business Times article on the salary increase across the board for the larger law firms in Singapore. The article reads:

Singapore’s largest law firms have upped the monthly salaries of their lawyers significantly, as they brace themselves for the onslaught of competition from the foreign law firms, amid the liberalisation of the legal industry here.

BT understands that Allen & Gledhill (A&G), Drew & Napier and WongPartnership have all raised monthly pay by 20-25 per cent, within the last week or so – such that their starting salaries are now in the region of $5,200.

This takes them closer to the pay scale of the foreign firms, which BT understands typically pay between $8,000 and $10,000 for first-year associates.

What this also means is that the fight for talent has just become that much tougher for the medium and smaller-sized firms.

‘The liberalisation of the market means our local talent pool is now available to all – firms from all over the world,’ WongPartnership managing partner Dilhan Pillay explained to BT. ‘So, our firm has had to respond to such market changes.

‘What we’ve done is reorientate our pay structure. Traditionally, a significant portion of our annual pay was in the form of a year-end bonus. What we’ve done now is to spread a large part of that bonus over the 12 months of the year and pay a smaller bonus at the end of the year.’

‘This is similar to what the foreign firms do – which is to frontload and then pay out a smaller bonus at the end of the year,’ Mr Pillay said. ‘The market has come to expect that level of pay – along with the good training and work exposure that the top firms offer.’

While some say this is not a pay hike per se, it definitely has the effect of boosting monthly salaries significantly – 25 per cent, in WongPartnership’s case – making the legal sector, already one of the best pay masters here, an even tougher act to follow.

BT understands that the larger local law firms in Singapore typically pay top performers between six and nine months’ bonuses. Foreign firms tend to either not pay year-end bonuses or pay a small bonus.

A&G and Drew explained similar changes at their firms.

A&G managing partner Lucien Wong said: ‘We are revising the decades-old practice of large law firms paying to their associates bonuses at year-end which are pegged to a number of months of their monthly base salaries.

‘This revision will take the form of an addition of a monthly variable component to the base monthly salaries of our associates. With the introduction of a monthly variable component, it is expected that the year-end bonuses of our associates will be moderated.’

Drew & Napier CEO Davinder Singh told BT: ‘We have revised our remuneration structure for lawyers. Under the revised scheme, part of the bonus for the year will be frontloaded as a variable component into the monthly salary, which will result in higher monthly pay for lawyers. So while the base will remain the same, there will be an additional monthly variable component.’

Such a change in pay structure at the larger firms has increased the pressure on the smaller and medium-sized firms – whose monthly pay packages now lag the leaders by possibly between $1,000 and $2,000.

A prominent lawyer here told BT of his concern about the impact of the recent pay changes on the industry. ‘It would have been ideal if the opening of the legal market (to foreign firms) could take place after supply had increased. Where demand exceeds supply, this will increase wage costs and lead to a spiralling of legal costs and, if fee inelasticity exists, the costs will be passed on to clients.

‘If not passed on to clients, some law firms may be priced out of the market.’ He added: ‘The impact for firms which aim to compete by paying much more is that they will have to remain lean, be less generous in hiring and quicker to axe, and staff will be made to work harder. Employers will be more demanding of these higher-paid lawyers.’

BT understands that some of the medium-sized firms are already thinking of increasing salaries to stay competitive.

Some, like TSMP Law Corporation, increased monthly salaries several years ago – while still keeping the sizeable year-end bonuses.

‘We increased our starting pay for newly called lawyers to $5,000 about two to three years ago, when the big firms were paying $4,600. We wanted to send a message that we would pay for top quality talent, and that we wanted the best,’ TSMP joint managing director Stefanie Yuen Thio told BT.

‘Whether we will be changing our pay is something we will have to continue to monitor. While we don’t want our associates’ monthly pay to be too different from what other firms are paying, philosophically, we have a different mentality on bonuses.

‘One of our fundamental management principles is that we must be able to pay outperformers very well, without worrying that it will rock the boat as far as the other lawyers in that batch are concerned. We will therefore want to retain the ability to reward our top performers with an exceptional pay package, and hopefully incentivise others to up their game.’

Some points jump out right away. A starting pay of S$5,200 at the Big 4 law firms in Singapore is great, and even higher is the starting pay of S$8,000-10,000 at the foreign firms in Singapore.

The ending quote about rewarding the outperformers struck a chord. I don’t think this is really practiced much in Malaysia, with possibly a few firms adopting such a style.

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