Compensation Report

Attribute to William Wesley, Asia Legal Blog

As top firms are recovering from the economic recession, they are offering increasingly competitive packages in order to attract and retain top legal talent in the Asia market. Hiring conditions across Asia are showing steady and noticable signs of improvement with new openings in fund formation, project finance, capital markets, M&A and FCPA/litigation.

Interestingly, the Hong Kong market for the last twelve months has been experiencing the beginning of tussle for HK qualified associates as a few American firms have begun to pay their Hong Kong qualified associates at New York-scale salaries starting at $160,000 for first years. However, it is important to note that not all of their competitors in Hong Kong have followed suit and some are waiting to see how these salary changes develop.

The Hong Kong and Beijing offices of US NLJ 350 firms also saw large increases in their lawyer headcounts this year. Beijing firms experienced an 11% gain and Hong Kong firms experienced a 5.6% gain.

When comprising an offer, law firms consider several factors such as cost of living, hardship associated with living in particular locations, familial status, competition/supply of appropriate candidates with a particular skill set, the firm’s interest level in a candidate, profitability of the office, and the firm’s ability to attract and retain top talent. As more U.S. law firms establish offices in Asia and compete for legal talent, expat packages might increase.

For lawyers wanting to make a lateral move, it is more important than ever to thoroughly research the various benefits of potential placements. Be careful and use an experienced and knowledgeable recruiter who can provide you with current remuneration information and negotiate on your behalf. Make sure that the recruiter has experience in the specific market, and a sharp focus on that market.

                                                                    Ex-pat Package Must-Haves

US Qualified Associates:

Base salary: At the most competitive law firm in terms of compensation, US qualified lawyers are paid at New York rates ($160K for first year lawyers, $170K for second, $185K for third, $210K for fourth, $230K for fifth, $250K for sixth year lawyers). Firms that pay NY rates include but are not limited to the Wall Street law firms and other firms that compete most directly with the Wall Street firms for associates. Generally speaking, the more profitable the law firm in terms of profits per equity partner and revenue per lawyer, the more likely they are to pay NY rates regardless of whether they are headquartered on Wall Street.

The law firms that do not pay NY rates tend to pay rates that are equal the rates paid in the office where the firm is headquartered, but as mentioned above many non-NY firms still pay NY rates. At firms that do not pay NY rates, associates still earn well into six figures, but on average about 10-15% less than NY rates.

Bonuses: Some firms offer discretionary bonuses that will follow those given to attorneys at the firm’s head office. Depending on the firm, any performance bonuses may be pro-rated, and this is typically based on the candidate’s start date and marketability as well as the firm’s profitability in that fiscal year. The more competitive firms pay flat bonuses that are consistent with New York bonuses, while some firms tie bonuses to factors including class year, hours, and/or pro-bono activities.

Tax Consequences: U.S. citizens and permanent residents (green card holders) must pay U.S. income tax, in addition to any income taxes due to the host country. However, there is relief – the first $95,100 of your salary will be excluded from your U.S. income tax liability, regardless of location. Housing allowance exclusions vary according to country (i.e. in Hong Kong, your housing payments are deductible up to 50% of your taxable income).

Tax Equalization: Due to double taxation on sums above the exemption, most international firms have implemented a tax equalization plan as part of a remuneration package, which can offset the expatriate’s tax burden and sometimes undermine a tax benefit to associates in certain markets. Tax equalization plans are designed to make taxes a neutral factor in an expatriate’s compensation package.

A U.S. taxpayer may also exclude a certain amount of his or her foreign housing expense that is the excess of the taxpayer’s reasonable “foreign housing expense” for the tax year over a “base housing amount” equal to 16% of the maximum foreign earned income exclusion amount for the calendar year, multiplied by the number of days of foreign residence or presence by the taxpayer for the year. However, foreign housing expenses may be excluded only to the extent of the lesser of: (i) the expense attributable to the law firm provided amount; or (ii) the taxpayer’s foreign earned income for the taxable year.

Expat benefits: Firms generally offer a range of benefits for foreign nationals working in Asia. A variety of factors influences the package that is offered, including cost of living, profitability of the office, the firm’s competitiveness in the legal market, an attorney’s nationality and academic pedigree, and whether a firm considers the location to be a hardship destination. For example, Singapore firms often do not offer expat compensation because it is not considered a hardship post, but some law firms there have begun offering benefits between US $20,000 and US $45,000.

UK Qualified Associates

Salaries and Bonuses: Throught Asia, the magic circle firms pay their UK associates rates similar to what they would earn in London at the same firm (but US associates are paid US rates). [Susannah- Maybe we can list rates for 1, 2, 3 years qualified etc for a magic circle firm like Allen Overy, etc.]

It’s worth noting that salaries tend to vary slightly (maybe one or two percent) between Magic Circle firms for each class year, but these firms tend to basically pay the same rates. UK Lawyers are paid bonuses from between 10 to 40% of their annual salary depending on PQE and performance. Other benefits like tax equalization are not uncommon.

                                                                         Hong Kong

For more information on basic salaries for US and UK qualified associates in
Hong Kong, please refer to Section 2 above (“Expat Package Must Haves – US Qualified Associates and UK Qualified Associates”). Expat packages in Hong Kong at firms that pay such compensation (many do) can range from $20,000 to $70,000.

For Hong Kong qualified associates, packages in Hong Kong have experienced much more variance than usual this year, as a few American firms have chosen to pay all of their associates, whether US or Hong Kong qualified, New York scale salaries starting at $160,000 for first-years. Benefits often include housing and moving allowances for the associate. However, generally speaking Hong Kong-qualified attorneys will receive pay consistent with the domestic market. For Hong Kong associates, the median starting salary is HK$63,000 per month. Moreover, Hong Kong associates receive bonuses that are on average 12.5% of the lawyer’s salary

                                                          Mainland China (Beijing and Shanghai)

For more information on basic salaries for US and UK qualified associates in Mainland China, please refer to Section 2 above (“Expat Package Must Haves – US Qualified Associates and UK Qualified Associates”). Expat packages can range from $20,000 to $60,000.

Taxes are higher in Shanghai and Beijing than in Hong Kong but the cost of living is significantly lower than in Hong Kong, so ex-pat packages are typically about 20% smaller. With that, firms will often tax equalize pay to ensure that lawyers in Mainland China receive remuneration similar to associates in Hong Kong. Essentially, associates in Mainland China will receive benefits that are similar to the Hong Kong ex-pat model package.

PRC Nationals: PRC attorneys who have a JD are usually hired as associates while those with only an LL.M. from a top U.S. law school, who are qualified to practice in New York or California, and have worked at an international law firm might be hired as “associates,” “foreign associates,” or “legal consultants,” depending on the law firm and level of experience.

Compensation for PRC nationals can vary, but they certainly receive a higher salary at a foreign firm rather than at a Chinese firm, although the pay at a U.S. or U.K. firm for PRC nationals might be far below that of expatriates. The range for an annual base salary for a PRC associate would start at 50,000 to 120,000 RMB, and increase with experience. Bonuses for PRC nationals might also be lower than for expatriates, and, unless they hold a green card, they most likely will not receive an ex-pat allowance of any kind. Some firms offer travel and relocation expenses but that is becoming rare in the current market.

                                                                        Tokyo

General Considerations: In Tokyo, the ex-pat packages that went out remained stronger than in any other Asian market, given the cost of living and particularly small supply of bilingual attorneys looking to practice there. The packages range from $45,000 to $85,000 USD, depending on seniority, familial status and firm. In Tokyo, most U.S. and U.K. firms also offer to cover the costly venture of relocating and securing housing there, and they cover the “key money” and deposit, acting as guarantor and usually signing leases in the firm’s name.

U.S. and U.K Nationals: U.K. firms offer salaries are linked to the lawyers’ level of qualification in London with a significant additional cost of living allowance. Such benefits, include, health care, gym membership, and airfare expenditure.
U.S firms offer a lump-sum salary to their associates, which will be higher than the salaries given by U.K. firms. Some U.S. firms will give associates “New York scale” salaries with benefits. In general, bonus packages follow the firms U.K or U.S. model.

For more information on basic salaries for US and UK qualified associates in Japan, please refer to Section 2 above (“Expat Package Must Haves – US Qualified Associates and UK Qualified Associates”).

                                                                     Singapore
General Considerations: Law firms in Singapore historically did not offer ex-pat packages, given that it was not considered a hardship destination and the cost of living is so moderate. But as Singapore began competing with other locations such as Hong Kong for top attorneys, firms there had to start offering certain benefits including relocation and minimum housing allowances. In general, these benefits offered by firms range between $20,000 to $45,000 USD. Some firms do not offer any allowances because companies and firms considered Singapore a non-hardship post.

U.S and U.K. nationals: For more information basic salaries for US and UK qualified associates, please refer to Section 2 above (“Expat Package Must Haves – US Qualified Associates and UK Qualified Associates”).

U.K. firms offered salaries that ranged from SG$120,000 to $140,000. However, lawyers in Singapore were given bonuses around 10 to 15% of their annual salary. Moreover, the tax rates in Singapore are smaller than in London, and most associates rarely pay more than 15% in tax.

World’s Most Attractive Employers 2013 – Who is “In” in Asia?

credit to William Chin

The people at Universum just published their 2013 World’s Most Attractive Employers ranking.  How do companies fare in Asia when it comes to employer of choice and employer branding?  How are students selecting their choice of employers to work for?

Sony, Toyota and Lenovo were the only three Asian companies that made the Global Rankings.

• Sony managed to maintain its 9^th position among Engineering students while falling three spots to 18^th among Business students.
• Its Japanese counterpart Toyota kept its 45^th position among the Business cohort despite taking a slight dip of three positions to 21^st among Engineering students.
• Lenovo, the only Chinese company in the list, improved seven positions to reach 37^th among the Engineering cohort.

Ranking Methodology

The global rankings were based on the responses of over 200,000 students from top universities in 12 countries, including Australia, China, India and Japan, who participated in Universum’s annual student survey earlier this year. Through the survey, they indicated the organisations they deemed IDEAL to work for and why, as well as their career preferences upon graduation.

• Respondents acknowledge the companies they would “consider working for”
• Then select their five “ideal employers”
• The rankings, dubbed the Universum Top 100, measure the employer appeal of companies in the recruitment market.

Asia Pacific Ranking

• Countries covered in 2013: Australia, China, Hong Kong, India, Japan and Singapore
• Total number of students surveyed in 2013: 62,697 (26,246 Business, 36,451 Engineering/IT)

Here are the Top 25 Ranking in APAC

The Demand and Local Talent Gap in the Chinese Market

credit to hamza

China has been one of the fastest developing economies in the past decade, but developments bring new challenges and obstacles along with it. One such challenge, which is becoming increasingly important for the Chinese Market to meet, is addressing the shortage of available leadership talent in the recruitment market.

Indeed, state owned enterprises as well as multinational and local companies are having an increasingly difficult time finding individuals with the right set of leadership and managerial skills to add to their teams. One of the reasons for this is thought to be China’s educational system which prevents the development of critical skills by “relying to heavily on memorization”(Newswise, 2012). Another cause exacerbating the shortage of talented candidates within the Chinese market is the high level of economic development taking place within the country throughout the past decade. This quick growth in the economy has prompted many companies to develop or expand to China within a short span of time, in turn exponentially increasing the demand for talent.

When it comes to company needs two main issues seem to be at the heart of the matter, finding and hiring experienced managers and retaining valuable employees within the company. Senior managers that have a good amount of experience under their belt are becoming increasingly rare to find whilst “commanding a high salary”(Newswise,2012). A study conducted by McKinsey had concluded that one of the biggest obstacles facing companies throughout China is that of recruiting capable managers (McKinsey). In order to solve this problem, “local companies are matching or exceeding MNC salary packages, offering enticing benefits and attractive career paths to senior management” a subject we will be delving into in our next article regarding the importance of Employer Branding (Forbes,2012).

When seeking and keeping the best talent, there are issues to, as Judith Bannister, director of global demographics at The Conference Group notes, “for multinationals, it is now a challenge not only to recruit the best people, but also to develop and retain them”(Bannister, 2012). As the rarity of talented and pragmatically skilled individuals increases so does their leverage when it comes to negotiating with and imposing conditions on their potential employers. “Keeping them after they get them is another problem. Wage increases alone are no longer enough. Companies are trying everything to win the hearts and minds of their increasingly mobile and independent-minded workers” (Sirkin, 2013).

The opportunities for managerial candidates interested in working in China are extremely advantageous, especially for those possessing strong leadership and creative skills. These advantages stem mainly from the quick development of the Chinese economy and heavy foreign investment which has left a gap in the market due to the increased demand for skilled managers. The difficulty for employers in China to find skilled managers has lead them to pay extra attention to the incentives and motivations candidates value the most when working for companies and to heavily invest in their Employer Branding. For this reason, we will next be exploring the subject of Employer Branding and its key role in attracting and retaining high value candidates. Stay Tuned!

Crucial key skills for the Chinese Market

credit to hamza

Previously, we had explored the subject of China and the existing talent gap that is handicapping the local recruitment market; this article will in turn explore the ways in which one can capitalise on this talent gap.

As one of the biggest and fastest developing economies in the world, China needs much more talent than is available within the country to fill in its vacancies, for this reason it looks to attract an increasing amount of international talent. This talent shortage can be felt across all sectors with “China now moving up the value chain in the manufacturing industry, while also becoming more prominent in sectors such as healthcare, IT, leisure and professional services”(). These developments have therefore created many career openings for highly qualified oversee graduates, both Chinese and international, who struggle to find jobs in the western world.

One of the main issues with the existing talent gap in China is the education which “relies too heavily on memorization” (reliableplant.com). This produces graduates that are highly efficient but dependent on leadership, with difficulty thinking creatively or taking initiative independently (reliableplant.com). A study conducted by Mckinsey on the topic had revealed that “there is an ongoing mismatch between the sort of graduates most Chinese universities turn out and the type of candidate who would interest local and regional companies”(). For this reason, the appeal of locals having received a western education and international elements is at an all time high for companies based China.

Moreover, most of the jobs that employers throughout China are having the most difficulty filling are ones that require individuals from specialised fields of expertise such as engineers, technicians, accountant and Finance staff (manpower, 2013). Experts are partly blaming China’s outdated education system for not equipping graduates with the necessary practical skills to be able to function in the real world. A recent article on the talent gap in the Chinese Hospitality sector argued that “educational institutions in China should take specific steps to update course curricula and materials to develop students’ functional, social and business skills” (chinabusinessreview, 2012).