Freshfields office in Washington, D.C.

Sometimes, attack is the best form of defence. Perhaps this explains why Freshfields Bruckhaus Deringer decided to spark a full-blown pay war in the U.K. when it announced in May it was increasing its salary for newly qualified lawyers to £100,000 (about $126,000).

The decision was significant not just because the move forced the rest of the market to follow suit – Slaughter and May, Allen & Overy, Clifford Chance and others have all matched it – but also because it hints at a new mindset for the Magic Circle firm.

Wars for talent at the graduate level occur every few years. In the past, they have been triggered by U.S. firms in London hiking their rates. But U.S. firms are so far ahead of U.K. firms these days – Kirkland & Ellis and Latham & Watkins both pay about £143,000 (nearly $181,000) – that the rest of the market no longer tries to keep pace.

This time, Freshfields surprised the market by moving first. It remains behind the U.S. firms in London but was clearly ahead of its top-tier U.K. rivals. The firm clearly does not want to rely on reputation alone to attract and retain the best talent.

Freshfields seems to be taking a similar approach at the senior end, too. The junior salary rise coincides with efforts to address the war for partner talent.

Freshfields was apparently so conscious of the continued threat that it would be raided by U.S. rivals, that it tweaked its famously conservative lockstep model in late 2017 in an attempt to keep hold of some of its best up-and-coming partners. But it appears the firm's changes did not go far enough, as a series of departures subsequently materialised, including the losses of highly rated private equity partners David Higgins and Adrian Maguire to Kirkland, and top-ranked high-yield partner Ward McKimm to Shearman & Sterling.

Now the firm is returning to the thorny issue of compensation and is considering a system that would allow its best junior partners to accelerate more quickly up the lockstep ladder.

In theory, a change sounds simple. But for Freshfields, it represents much more than just stopping the odd loss. The firm, founded in 1743, has operated with a traditional law firm model for literally hundreds of years. That it made two lockstep changes in the space of a year or two suggests something deeper is going on.

Lockstep supporters argue that Freshfields is a storied institution with a long history of success and grandeur that must not be compromised for the sake of a partner or two. They believe part of the reason Freshfields draws in top-quality work is because it has some of the best competition, regulatory and tax lawyers in the industry. Those partners may not be able to bill such impressive numbers as their corporate, restructuring or litigation counterparts – and so would not be as well off in a more merit-based system – but they are a key reason why the firm is highly regarded by clients.

And yet Freshfields also knows it is already embroiled in this war for talent, whether it likes it or not. Magic Circle firms have long been able to handle the loss of a few top partners because they have such a strong pipeline of junior partners coming through, thanks in no small part to their ability to hire a large crop of the best newly qualified lawyers available. What happens if that pipeline is weakened? The firm clearly doesn't want to wait around any longer to find out.

That's why changes to its remuneration model and to its newly qualified lawyer salary make sense. Both moves might feel slightly aggressive, but they might also be the best defensive strategies available.

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