Which firms spent the most on their staff last year?

Linklaters spends more than all of its U.K. peers on wages, according to research that shows its total costs per lawyer have topped £300,000 for the first time.

Analysis of the top U.K. firms' limited liability partnership accounts by accountants Smith & Williamson found the Magic Circle firm had the highest wage bill and topped the ranking when that figure was divided by the total number of lawyers.

Linklaters' total wage bill amounted to £308,400 per lawyer in the 2018-19 financial year, ahead of second-placed Clifford Chance on £278,300, which itself was narrowly ahead of Freshfields Bruckhaus Deringer and Allen & Overy.

Salaried partners would classify as staff, which means firms with all-equity partnerships could have lower numbers. In Linklaters' case there are more than 100 partners included in the staff pay figure.

The figures do not give accurate lawyer pay averages because they also include firms' non-fee earning staff. But the ranking order was similar when measuring salary costs per total employee — lawyers and non-lawyers. Linklaters topped that measure, followed by Freshfields and Clifford Chance.

At the other end of the spectrum, Keoghs spent the least money on lawyer costs out of the top 50, at £38,100 per fee-earner. TLT and Freeths were not far ahead — each spent around £55,000 per fee earner.

A spokesperson for TLT said of their figures that the "extensive central resourcing nature of some of our services involves significant numbers of more junior fee earners, and this is reflected in our average spend data".

Linklaters' wage bill amounted to 48% of its total revenue, slightly ahead of Freshfields (46%) and Clifford Chance (45%) and well ahead of A&O (37%). The average for the top 50 was 42%.

The firms with the highest proportion of revenues spent on salaries were BLM and Gateley, where 61% of turnover was spent on wages. Gateley said its salary figure includes partners, which is different to traditional partnerships as it is a PLC. The firms with the lowest were Freeths, Fieldfisher and Macfarlanes, where 30% or less was spent on wages.

Wage bills have risen across the top 50 firms for several years as a war for talent has translated into higher salaries. Wage bills rose on average by 6.5% in the 2018-19 financial year, the analysis showed, and it rose by a similar amount in the previous year.

But some firms have started to cut junior salary levels as the industry fights to keep finances healthy amid a steep fall in transactional activity following the onset of the coronavirus pandemic.

The Smith & Williamson findings showed that 36 of the top 50 U.K. firms did not have enough cash to cover three months' lawyer and staff salary costs for the financial year ended April 2019, increasing their exposure to the negative effects of the lockdown.

The auditor also found that 37 top firms had bank loans and overdrafts totalling more than £800 million on their balance sheets.

With reporting by Paul Hodkinson.

Read More

'A Real Risk of Collapse': An Auditor Analysis of the Top 50 UK Firm Accounts

At Risk: The Firms With The Least Cash and The Most Debt

Law Firms Get Creative on London Rent Arrangements