US law firm Milbank Tweed Hadley & McCloy has fired the starting gun on a City-wide pay war.
The firm has introduced a new pay scale for its junior lawyers with first-year lawyers set to earn an annual salary of $190,000 (£143,000).
The move puts pressure on its US rivals, most of which have substantial City bases, to follow suit.
Freddie Lawson, who heads up recruitment firm Fox Rodney Search's junior lawyer business, said the leading US firms in London were likely to match Milbank’s pay rise.
“The money will go up in London without question. The other US firms will be scrabbling around right now to react and they will have to react,” he said.
The new pay scale will see first, second and third-year associate lawyers receive a $10,000 increase, with first-year lawyers now paid $190,000.
Lawyers in their fourth to eighth years will receive $15,000 more, meaning lawyers at eight years post-qualification will now receive $330,000.
The London-headquartered magic circle firms typically pay their US-based associates on the same scale as the leading US firms and will now be under pressure to match Milbank’s pay rise.
However, the magic circle firms do not pay their junior London lawyers at the same rate.
Linklaters pays its first-year lawyers in London around £90,000 when salary and bonus are combined while Slaughter and May pays its first-year lawyers in London a basic salary of £80,000 with a potential performance bonus of nine to 16 per cent.
The top US firms also pay their partners increasingly well, with partner pay at the leading US firms in London now hitting the $10m mark.
Lawson said that the latest pay increase “puts more pressure on the magic circle”.
“Not only is it clear that at partner level you are going to become much richer working for a US firm but also at associate level,” he said.