Leading US firms hold back on adopting latest New York associate pay rises in Asia as Linklaters yet to make a decision on introducing the new scale anywhere

Within two weeks of New York-based Cravath Swaine & Moore announcing that it was increasing its associate base salary from $160,000 (£109,000) to $180,000 (£124,000), more than 50 global firms in the US and the UK have opted to match the new pay scale in New York and elsewhere.

Many US firms have extended the pay hike to the competitive London market and UK firms Freshfields Bruckhaus Deringer, Allen & Overy and Clifford Chance have confirmed that they are matching the new pay scale for their associates in New York.

But in Asia, where conditions remain depressed, firms are so far taking a more cautious approach.

Of the UK firms, only A&O has said it will apply the increase to all of its US-qualified associates regardless of location, therefore including US qualified lawyers in Hong Kong and elsewhere in Asia, as well as London. Freshfields is thought to have made the same decision but Clifford Chance has not confirmed and Linklaters has yet to make a decision on raising US salaries at all.

The picture at US firms is more stark, with many big players still to confirm their stance.

So far Davis Polk & Wardwell, Milbank Tweed Hadley & McCloy, Simpson Thacher & Bartlett, Paul Weiss Rifkind Wharton & Garrison, Kirkland & Ellis and Weil, Gotshal & Manges have all confirmed they will include their Asia-based associates in the latest round of salary increases.

In contrast Latham & Watkins is implementing the salary increases in locations such as Hong Kong, London and Shanghai but has elected not to extend the rise to its 16 associates in Singapore. Akin Gump Strauss Hauer & Feld has included nine Hong Kong-based associates and counsel in the rise, but not attorneys in its Beijing or Singapore offices.

And many firms that have announced pay rises in the US, including Skadden Arps Slate Meagher & Flom, Sullivan & Cromwell, and Sidley Austin, have not confirmed their stance to pay in Asia either way.

"It's an easy decision for us," says William Barron, Davis Polk's Hong Kong-based Asia managing partner. "We don't make a distinction between qualifications and offices; every associate is treated the same."

Kinney Recruiting Asia head Evan Jowers is optimistic others will follow suit despite the delay. "I fully expect the US practices at the magic circle firms to raise their base salaries, as will all the top US firms."

He goes further, adding: "The now higher US associate base pay will also raise base pay for UK qualified associates at top US firms' local Hong Kong practices.

"Such a move would increase the gap in compensation between most UK qualified corporate associates at UK firms and US firms in Hong Kong."

Laura Zhao, principal of Hong Kong-based legal recruiter Togni & Zhao, says the decision to differentiate based on location and the delay in adopting the rise globally differs markedly from what happened a decade ago during the last round of salary raises. Back then, most firms quickly followed suit in Asia after the base salary in New York rose from $125,000 to $160,000 in less than a year, between 2006 and 2007.

Zhao and fellow recruiter Emma Zhang, a consultant at Hudson, argue the disparity is a healthy sign.

They say that a pay increase in Asia's sluggish legal market, especially for firms that rely heavily on capital markets work, wouldn't make economic sense.

Global firms in Asia are already cautious about hiring associates and increasing the pay scale now would likely make it harder for young lawyers to land jobs at international firms.

"It means that firms are now more mature in this market; it's less likely for them to follow these trends blindly," says Zhang.

According to Zhao, post financial crisis many associates are already paid on different scales in Asia. She argues that a firm's pay grade is less transparent than in the US or UK, with packages often individually negotiated.

In addition, the Asian offices of many US firms give junior lawyers titles such as "legal consultant" and "legal manager" rather than "associate", with Zhao predicting the use of such titles will increase across Asia with the latest increases for US qualified lawyers.

While the division of labour between legal consultants and associates has blurred, their respective salaries are quite distinct. In China, for example, a first year junior lawyer at a US firm made about $40,000 a year, according to a recent salary survey of private legal practices carried out by Hong Kong-based recruiter Aquis Search before the latest salary increases. That's one-quarter of the $160,000 that first-year associates on the US salary scale in the region were making before this summer's increase.

In addition, lawyers on the US pay scale receive a cost of living allowance, or COLA, on top of their salary ranging from $60,000 to $80,000 a year. The system was originally created to offset double taxation for US citizens; but as demand increased for Mandarin-speaking lawyers, many firms extended to scheme to non-US passport holders as well. These days, Zhao says, fewer people are getting COLA in Asia, another sign of firms tightening hire budgets.

While the differences between US and local salary scales in Asia looks likely to grow given the latest increase, many UK firms will not be able to afford to maintain too wide a disparity.

And though one magic circle partner concedes this is likely to provoke tension between associates on different pay scales he concludes: "We think we have to pay to get the best people – it is what it is."