King & Wood Mallesons (KWM) and Herbert Smith Freehills (HSF) have announced plans to lift pay freezes in Australia after witnessing a more robust domestic market.

The two firms, both of which cancelled salary reviews in 2013 as a means of cutting costs, said they will announce pay changes this year for both associates and support staff in August and July respectively.

According to HSF, which last summer announced a 3% increase in junior salary bands for UK lawyers, the decision to postpone its review in Australia was unrelated to the merger of legacy Herbert Smith and Freehills, which went live on 1 October 2012.

The move was due to ailing market conditions, it said, which saw several firms scale back by way of redundancies, recruitment freezes and real estate cuts.

In a statement to Legal Week, managing partner for Australia, Jason Ricketts, commented: "We have been regularly reviewing our position and although there may be more challenges ahead, earlier this year we started to see some commercial recovery in the marketplace and some areas of the firm have also been consistently busy.

"Under these conditions it was important that a review went ahead this year. Leading up to July 1 all lawyers and staff in Australia will be individually appraised. In a high performance environment such as ours it is important to recognise and reward outstanding work in line with our market."

Unlike the UK partnership, HSF in Australia does not set a firm-wide annual increase for staff at certain levels but rewards each individual based on merit, with no limit on pay rises.

As well as looking at performance, the review process will also take into account the success of the firm as a whole during the previous 12 months and the local market rate for lawyer salaries.

Currently associates and staff are paid according to their legacy arrangements, despite a new global partner remuneration system, namely a managed lockstep with a strong merit-based element, being introduced in December.

Ricketts added that uncapped bonuses would also be given this year, with the aim of rewarding exceptional performance "above and beyond expectations".

As for KWM, the process for reviewing salaries is set to be announced in August instead of July for the first time.

Increases will be given to both support staff and lawyers dependent on individual performance, as the firm takes steps to move away from salary banding and pay rises based on seniority.

The firm said it would also hand out bonuses, but did not clarify whether there was a cap on the amount to be paid.

The focus on merit-based pay is unsurprising for KWM, which in September 2012 also announced plans to end its 10-year rigid lockstep for Australian partners, and to bring in a new modified scheme allowing for increased flexibility.

The system was formally introduced in January 2013, with partners assigned between 30 and 100 points and the capacity to earn bonus points up to 130.

Linklaters ally Allens, and Ashurst Australia – formerly Blake Dawson – both declined to comment on whether a salary review would take place this year, as did independent firm Minter Ellison.

Clayton Utz said it would be finalising its budget in June, at which point it would consider pay reviews.

Media reports last year remarked on how several of the top firms had cut costs in the preceding six months by "managing headcount expenses."

Related: Herbert Smith Freehills raises pay for all lawyers up to 3PQE