Allen & Overy (A&O) has overhauled its pay bands for junior lawyers with the City giant restarting its associate track and agreeing modest rises in its underlying salary bands.

The pay increases, which are effective from 1 May, will see the firm's salaries range from a newly-qualified (NQ) rate of £61,000 to £74,000 for solicitors with two years' post-qualification experience (PQE).

Following the pay rise, NQ rates go up from £60,000 to £61,000, while first-year PQE salaries rise from £65,000 to £68,000. Two-year PQE lawyers will receive £74,000.

Trainee rates remain static at £38,000 while the firm has focused on increasing more senior associate pay rates with three and four-year PQE associates seeing rates increase from £71,500-£84,000 to a new range of £85,000-£94,000.

In common with most City law firms, A&O last year effectively halted its associate lockstep, dropping salaries for newly-qualified lawyers from £65,000 to £60,000 from September 2009 in response to the global recession.

A number of major firms have this year begun again moving associates through their annual salary bands, in some cases also making modest rises to the bands. However, the widespread freeze in 2009 and the introduction of lower rates has still reset the compensation of associates, who in some City firms were being paid starting salaries of £66,000 during 2008.

At A&O's peers, CC is the only other magic circle firm to also increase its rates within the pay bands for the year ahead, with Linklaters and Freshfields Bruckhaus Deringer opting only to restart lockstep progression.