Herbert Smith Freehills (HSF) has become the first leading UK firm to announce London associate pay rates for 2018-19, moving to distance itself from experience as the basis of remuneration in preference for more merit-linked pay.

The Anglo-Australian firm has introduced 'career milestones', dividing its associate rank into three bands, within which individual pay will be determined by performance.

The first band runs from NQ to two years' post-qualification experience (PQE), with total compensation for the band stretching from £93,000 at the bottom to £114,000 for the best performers. In theory, it will be possible for a high-performing NQ to make more than a lower-rated lawyer with two years' PQE.

In addition to introducing career milestones, HSF has also joined the ranks of firms axing annual performance reviews in favour of regular feedback sessions throughout the year.

HSF last increased associate pay rates in 2016, when it ushered in new payscales combining bonuses and base salaries. These put NQs on a minimum of £82,000 in total compensation and a maximum of £90,000 depending on performance.

Lawyers with two years' PQE previously received between £97,000 and £107,000, while high-performing three-year PQE associates received between £112,000 and £122,000, including bonus.

Ian Cox, HSF's regional managing partner for UK, US and EMEA, said: "It is important for us to continue to attract and retain the best performers to deliver excellent client service. The new compensation system for associates enables us to drive high performance, reward the strongest individuals and helps us work with them to realise their full potential and fulfil their ambition."

HSF said its new approach to appraisals will focus on setting shorter-term objectives that are aligned with the firm's strategy. The objectives will be reviewed and revised throughout the year based on the progress of individuals and the firm's business needs.

CEO Mark Rigotti added: "This new global approach to performance reviews is to enable more meaningful conversations with our people. Fostering a high-performance culture by supporting people to reach their full potential is one of the key goals of our firm's strategy. We are using technology to enhance the process, making it more effective and efficient."

The firm declined to provide compensation figures for its mid-level and senior associate bands but confirmed that trainee rates have been frozen for the second year running, with first-year trainees earning £44,000 and second years taking home £48,000.

News of the UK pay overhaul comes after HSF last month joined the magic circle in raising US associate salaries, matching top-of-the-market rates set by Cravath Swaine & Moore that put the firm's most junior lawyers in New York on $190,000 (£143,000).