Lawyers living in lap of luxury as promotions, hikes increase after Amarchand Mangaldas split

Mumbai: Lawyers, even young ones, have never had it so good. Consider this: recently, a Delhi-based firm that specializes in regulatory affairs, asked its partners to choose a car from a range of premium brands. The firm was going to buy the car for the lawyers.

Or consider this: in top Mumbai law firms, giving very low interest or no interest loans for buying homes is a common incentive, offered to even relatively junior lawyers.

The Amarchand Mangaldas split started a trend of pay hikes and poaching that’s continuing and big and even mid-sized law firms have been forced to get into the game. And the game’s about to get sharper.

According to a Mumbai-based managing partner of a mid-sized law firm, many lawyers are waiting for their annual bonuses and are sitting on the fence. They will review other offers once the bonus comes in, he said.

ET spoke to many law firm seniors and headhunters for this story. Some spoke on the condition that they not be identified.

Many firms have hiked pay across all levels by 12-25%, said those who know the market. Quicker promotions have become the norm.

Lawyers in their late 30s and early 40s are being offered the prized job of practice heads (leading a specialist team). Partnerships are being fast-tracked. This was unheard of earlier.

Just money won’t keep talent anymore, a headhunter said.

“Not just lateral hires at higher pay- …firms are upping compensation levels and giving quicker career advances to retain senior middle level talent,” Balanand Menon, head, legal consulting, at legal search and consulting firm Vahura, said.

In many firms, founders are leveraging their close relationships with their star lawyers to retain them with a promise of getting them the choicest assignments and a greater say in firm management.

There’s no shortage of lawyers, but there’s a shortage of quality lawyers. “Most firms will report that they receive a large number of applications from lawyers every month but will also report that the general quality is very uncertain,” Vishwang Desai, managing partner of Mumbai-based Desai & Diwanji, said.

Desai & Diwanji offers a variety of performance bonuses and foreign offsites. There are plans to offer all employees insurance and fun incentives like company-paid monthly bar nights.

Nishith Dhruv, managing partner of MDP Partners, said the firm’s biggest challenge is recruiting talented lawyers. “We organize offsites twice a year…every month there is a party on the house…but the biggest incentive we offer to right people is to show them their future with the firm.”

Many other firms also emphasize the importance of an exciting working environment in retaining and recruiting talent. “We feel that offering challenging work and giving the freedom to execute it are effective ways to retain talent,” Somasekhar Sundaresan, partner at J Sagar Associates, said.

Abhijit Joshi, founder of Veritas Legal, said a combination of money, culture and treatment of talent is the key incentive. “Anyone of them alone may not be sufficient in the long run.”

How much of this salary boom is because of the Amarchand Mangaldas split and will it last?

Headhunters and senior lawyers said the split did cause a spike but there’s evidence of a general uptick as well. Bigger jumps will come once economic activity picks up across the board.

“Salaries will increase by and large in most firms…larger jumps will come once general industrial activity and multi-sector transactional work increases. Currently, technology and ecommerce, alternative energy and pharmaceuticals are seeing significant interest for corporate transactions…most of the other sectors are seeing no acceleration,” says Desai.

As of now, lawyers’ fees for top jobs haven’t gone up significantly but over- all law firm revenues are on the rise.

Yasmin Lambert, a consultant and equity partner at London-based research firm RSG Consulting, said fee rates haven’t really changed during the past 12 months, but the overall law firm revenues for 2015-15 are expected to have risen by 10-25% for the top 40 Indian law firms. The consulting company puts combined revenues of Indian law firms doing corporate and commercial work at over a billion dollars.

Budget 2016 punches lawyers, hike in service tax pinches everyone

Services are going to be costlier. And it’s going to be a taxing time for lawyers. The FM, a senior advocate himself, has withdrawn exemption of service tax enjoyed by lawyers so far. Now, like other professionals, lawyers will be taxed at 14% on providing legal services. The Swachh Bharat cess and the Krishi Vikas cess will be on top of that.

The provision has been extended to partnership firms of advocates, persons represented on an arbitral tribunal and the arbitral tribunal itself with effect from April 1.

The monetary limit for launching prosecution in service tax evasion cases has been increased to Rs 2 crore and the power to arrest has been restricted only to situations where the taxpayer has collected the tax but has not deposited it with the exchequer above a threshold of Rs 2 crore.

Travelling by ropeway, cable car or aerial tramway will be expensive with the government deciding to levy service tax at 14% from April 1.

Even exemption allowed so far on construction and commissioning of Metro and monorail has been withdrawn and they will be levied at 5.6%.

The FM, however, exempted services provided by Indian Institutes of Management (IIM) on its two-year fulltime post-graduate programme in management (PGPM) and other integrated programme in management and fellowship.