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The Global Lawyer: Why the War For Talent is Different in Europe

The Global Lawyer: Why the War For Talent is Different in Europe

The Global Lawyer: Why the War For Talent is Different in Europe

Last week I hosted a webinar featuring legal industry experts from across Europe and the week before I helped chair a discussion between leaders of of top independent European law firms. In both cases, one topic of debate was particularly lively: the war for talent.

The Continental European market is not unique in fighting this battle, but it does perhaps differ in how the battle is being fought.

In the U.K., domestic firms are trying – as best as they can – to compete with the hefty salaries being offered by U.S.-based law firms in London. U.K. firms already offer substantially less, but they are constantly offering more. In Canada and Australia, international law firms are trying to get their lawyers to leave the country, so local firms face a different kind of challenge.

In Europe however, the response to international firms raising salaries has largely been to turn the focus away from pay.

In the webinar, which you can watch here, International’s Benelux correspondent Linda A. Thompson, explained how local firms in Brussels don’t want to compete just on salary. Every firm talks about the importance of areas such as diversity and ESG, but European firms want to position themselves as attractive employers by offering other things such as a better work-life balance, a more pleasant working environment and more reasonable billable hours targets.

This appears to be more than just talk. Every week there are examples of policies being rolled out in Europe that demonstrate this, whether it is no work calls after hours, generous parental leave policies or fully paid sabbaticals.

U.S.-headquartered law firms are not increasing salaries simply to make life difficult for local firms around the world. They face a quandary every time they raise pay levels in the U.S. because they have to decide exactly how that will affect all of their other offices. When Wilson Sonsini Goodrich & Rosati sparked a pay war in Brussels in early November, it was simply bringing the office in line with its U.S. operations.

Even so, the effect on the local market is significant, and unwelcome.

The cynic might point out that European firms are offering an alternative to high salaries because they have little choice. Most Europe-based law firms are smaller operations. Of all the 31 law firms that have eight or more offices across Europe, only six are Europe-headquartered. And of those six, many have most of their offices in just one country.

In other words Europe-based firms tend to be independent operations that often do not have the heft to compete on salaries with their international counterparts.

This also offers some advantages though. During the webinar, Noerr partner Natalie Daghles, who was previously a partner at Latham & Watkins, made the point that international firms have a constant pressure to hit certain levels of profitability, which limits their ability to admit lawyers to the partnership in less lucrative jurisdictions. European firms can offer more career opportunities.

This was seen just last week as elite German firm Hengeler Mueller appointed six new partners, which might not sound like much but is one of the largest promotion rounds in the firm’s history. It is more than the mighty Latham & Watkins promoted in Germany during its largest-ever promotions round in October.

And when top international firms Simpson Thacher & Bartlett and Weil, Gotshal & Manges announced their partner promotions last week they added a combined 57 lawyers to the top ranks – but in Mainland Europe they managed a grand total of two.

But however strongly European firms make the same points, and however often lawyers say they are looking for something more than just money, there is no getting away from the fact that money is the ultimate driver.

After so many of the country’s firms said they would not be taking part in the salary war, Germany’s Gleiss Lutz unveiled huge salary rises last week. It boosted pay for its newly-qualified associates to up to €150,000, ahead of U.S., Magic Circle and other international law firms including rival Clifford Chance, which incidentally now pays more in Germany than it does in London.

Gleiss Lutz also announced plans to launch an office in London. Perhaps European firms don’t need to think so defensively after all.

And yet there is also no denying that despite the European firms’ rhetoric that they are the local leaders and European clients prefer local lawyers, U.S. firms have already made very clear in-roads into the continent.

It helps U.S. firms that many of the largest private equity firms are U.S.-based, but it still feels significant that it is two U.S. firms advising on KKR’s €33 billion bid to buyout Telecom Italia. The deal would, after all, be one of the largest European private equity acquisitions in history.

Meanwhile, Weil, Gotshal & Manges is considering plans to open an office in Brussels and Latham is making its mark on the booming field of cannabis law in Europe.

European-headquartered firms might not like it but this pay war is just part of a much larger battle. And the economics are not on their side.

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