Milbank Tweed Hadley & McCloy has become one of the first leading New York firms to move away from pure associate lockstep to a pay structure that also takes into account individual performance.

The firm has introduced a three-tier banding system in London that will run alongside its lockstep-based pay structure. The new structure, introduced in January 2010, will only apply in the City, with other offices maintaining pay based on post-qualification experience.

London associates will be placed into one of three pay bands based on their performance – with final pay taking account both years' experience and their band. The top band will see newly-qualified associates paid at standard New York rates – around £100,000 – while those in the lowest band will receive around 10% less.

Associates will move as normal through the lockstep but will be evaluated every six months and have their pay band adjusted once a year.

London head Russell Jacobs said: "The new system seeks to encourage our lawyers to achieve and contribute to excellent levels of all-round performance; ranging from client-driven transactions to internally-focused contributions to legal education and knowledge management. We aspire to have every associate in the top band and we encourage and mentor them to aim for that."

In a separate move it is understood that one of the firm's London-based senior associates is now paid based on hours billed. The firm stressed that this is a one-off special arrangement and not an office-wide policy for senior associates.