Two weeks ago, New York’s Cravath, Swaine & Moore kicked off bonus season for associates at the top U.S. firms, announcing that first-years would receive $10,000 on top of their base salaries of $160,000. The amount, unchanged from the year before, has already sparked some grumbling about the firm’s perceived stinginess.
In China, though, $10,000 is frequently more than what starting lawyers at leading firms make in a whole year.
According to senior partners, most major Chinese firms pay their Beijing-based first-year associates monthly salaries ranging from 5,000 renminbi, or $823, to 10,000 renminbi, or $1,646. Dacheng Law Offices, China’s largest firm, falls in this category, along with other well-known firms, including Allbright Law Offices, JunZeJun Law Offices and Broad & Bright. There is also a group of top-tier firms such as King & Wood Mallesons, Jun He Law Office, Fangda Partners, Haiwen & Partners and Zhong Lun Law Firm that pay monthly salaries between RMB 11,000 ($1,811) and RMB 14,000 ($2,304).
And young lawyers working in the capital undoubtedly earn more than lawyers working in most other cities in China.
Such salaries reflect the fact that, despite China’s economic rise over the past two decades, it remains a relatively poor country. According to a recent Peking University study, the average income for a Chinese household in 2012 was just RMB 13,000, or $2,100. But there is also staggering inequality of wealth in the nation, and that is also true within its law firms. Top partners often earn as much as or more than their peers at Western firms, even while their associates earn less than fast-food workers in the U.S.
Partners can get away with that because China is still very much a buyer’s market when it comes to young lawyers, thousands of whom graduate every year. In contrast, there are still only a small number of prominent firms, and most young lawyers consider themselves lucky to land an associate position at all.
“It’s true no matter what package they offer, they can always make hires,” says Lin Yanping, a first-year with Zhong Lun in Shanghai. “Many graduates will just go for the second-best, or the third-best, if they can’t get in the firm they want. It’s not ideal. Sometimes you don’t want to wait, you need the experience.”
The sorts of salary wars that periodically rock the profession in the U.S. or U.K. haven’t really taken off in China. Two years ago, Beijing’s Han Kun Law Offices decided to up the ante and pay starting lawyers a monthly base salary of RMB 20,000, or $3,292.
“We know that many graduates have little money to spend on rents and other life necessities,” says Han Kun partner Charles Li, “so we offer a higher starting salary when they need it the most.”
Yet 70-lawyer Han Kun remains alone among Chinese firms in offering its comparatively princely salary.
“I don’t think there is a need for us to match with others’ salaries,” says Broad & Bright partner Liu Hongchuan, who notes that his firm has not had any problems recruiting good associates. Liu declined to say how much his firm pays junior lawyers but concedes that it is less than larger firms like King & Wood Mallesons and Jun He.
Shi Tiejun, a partner at Jun He, says starting lawyers should think of their early years as an investment. “The first three years, the salary is low because you are here to learn, like an apprentice,” he says. “After three years, if you can keep up, the income will likely be doubled.”
There is no shortage of young lawyers willing to take up that offer. Beijing is home to perhaps the nation’s top law schools: Peking University Law School, Tsinghua University School of Law, Renmin University Law School, University of International Business and Economics School of Law and China University of Political Science and Law. The first four have enrollments ranging from around 300 to almost 700, while the last actually comprises four law schools with possibly as many as 1,700 students.
That means well over 3,000 law graduates come out of those five schools alone. China’s still relatively small cadre of big firms will only hire a fraction of them. Dacheng, the biggest, says it hires between 50 and 100 starting associates a year, with firms like 480-lawyer Jun He perhaps hiring half as many. Beijing-based Haiwen, which has around 120 lawyers, hired 11 new graduates this year.
With so many students vying for jobs, firms have come up with different ways of winnowing down the pool. Firms usually initially sift through résumés according to grades and internship experience. Applicants who advance to the second round will take a written test that usually includes a case analysis and Chinese-to-English translation of documents. Finally, candidates meet with partners for one-on-one interviews that determine whether they get hired.
Individual firms also have their own special requirements. Michael Gu, a founding partner with Beijing’s Anjie Law Firm, says his firm mostly hires entry-level lawyers that are graduates of a top Chinese university and have an overseas LL.M. degree.
“Having two degrees from both top Chinese and overseas universities at least means this student is hardworking and possibly a fast learner,” says Gu. “These are the qualities we believe would potentially make one a better lawyer.” Anjie pays its first-years around the same as King & Wood and Jun He: between RMB 11,000 ($1,811) and RMB 14,000 ($2,304) per month.
Money is an important but not an overriding consideration for Chinese law graduates. The firm that pays the most readily acknowledges that it hardly has a monopoly on the top talent.
“I wouldn’t say all the best students are here,” says Han Kun’s Li. “Graduates have a lot to consider while choosing a firm, and salary is just one of them. If somebody wants to go to King & Wood, they would go regardless of our higher pay.”
Lin Yunzhu is one such graduate. After earning his law degree at China University of Political Science and Law in 2006, he went on to pursue further studies overseas, receiving an LL.M. from Erasmus University in Rotterdam in 2007 and a J.D. from the University of Wisconsin–Madison last year. In October, Lin returned to Beijing and joined King & Wood as an associate earning RMB 12,000 a month, or $1,975.
Lin might have earned more at Han Kun or at one of the local offices for international firms, which usually pay their Chinese local lawyers around RMB 20,000 a month or more. But most of those are put to work advising on inbound foreign investment deals.
“Because longer-term, I want to focus my practice on Chinese outbound M&A work, and the partner team at King & Wood is one of the best,” says Lin. “I know Han Kun offers a higher salary, but because they are less focused on M&A, I didn’t apply.”
Five firms—King & Wood, Jun He, Fangda, Haiwen and Zhong Lun—are widely regarded as having a reputational edge that allows them to recruit top students without necessarily paying the highest salaries.
“This is mainly due to the much more hierarchical social structure of the Chinese legal profession than its American counterpart,” says Sida Liu, an assistant professor at University of Wisconsin–Madison. Indeed, in today’s U.S. profession, the ability to pay the highest salaries and bonuses is often regarded as a key element of top-tier firm status.
Chen Jihong, a partner at Zhong Lun, says the top Chinese firms offer a clearer career path: “I think it’s important that young lawyers can see the potential to develop and get promoted.”
But promotion doesn’t follow a clear path. Unlike at Western firms, where associate seniority and salary generally increase annually in lockstep increments, the leading Chinese firms use an evaluation-promotion system.
“When you join, you are a first-year lawyer,” explains Chen. “If you pass the evaluation, you become a second-year lawyer the next year, but if you don’t, you remain as first- year.”
Usually, but not necessarily, associates are eligible for promotion to income partner after a minimum of eight years.
While Han Kun uses higher salaries to try to compete with the top five for talent, other firms tout their friendlier work environments and lower billable hour requirements.
“It’s a trade-off,” says Broad & Bright’s Liu. “You might be paid less, but your life quality could be improved. Over the years, we have had people leave to join firms like King & Wood or Jun He. It’s a different experience for them, but people still say we are a more pleasant firm to work for.”
Anjie’s Gu also says his firm offers a better lifestyle. “When we hire people, we want to encourage them to stay and eventually get promoted,” he says. “We don’t want to hire a lot and then eliminate them in a brutal way.”
But elimination is as much as part of the associate experience at Chinese firms as it is at their American counterparts. Dacheng ties its associate pay to billable hours. Associates earning the firm’s base first-year salary of between RMB 5,000 ($823) and RMB 10,000 ($1,646) a month are required to bill at least 1,200 billable hours a year. But the more they bill, the more they make.
Beijing senior partner Yu Xugang says Dacheng will pay a lump-sum bonus to those who have exceeded the minimum. “If one has 2,400 billable hours, the income will be more than doubled,” he says.
What about associates who fall below the threshold? The answer is unsurprising.
“Those who can’t keep up, we have to let them go,” says Yu.