In our previous article about salaries, we discussed the potential salary changes for lawyers moving within private practice and when moving from a law firm to an in-house position. Here our consultant Li Ji discusses the potential salary increase a lawyer can expect when moving within the in-house market. Is there a limit on the increase a lawyer can expect?
To answer this question, it is important to understand how companies structure their salary scales internally. Most multinational companies (MNCs) establish an employee compensation and benefits system based on a number of elements, including the current market rate, the performance of the company as well as the market position set by the company itself. Thus, different MNCs may have different salary ranges for a similar role in the market due to different internal salary scales. For a specific legal position, the company will firstly set up the internal rank/level of the position based on its importance internally as well as its internal salary system and this will set the budget for the role.
Generally, once the budget for an in-house position has been set there is little flexibility. In contrast to what is seen within law firms, companies set the position and the budget for the role first and then look for a suitable candidate based on the job requirements. Therefore businesses often cannot take on the talent that they really want because the price of the candidate exceeds the budget they have. Very rarely will a business be able to change the budget for a candidate, and lawyers moving within the in-house market need to be aware of this. This is because the budget for a position is directly linked with the internal ranking of the role, thus raising the budget is equal to a new head count (with a new ranking), which usually cannot be decided by a legal head or an HR head alone.
Secondly, the candidate’s current salary package is crucial when discussing a salary increase as part of a move. Most MNCs understand that lawyers will be looking for a salary increase when they move jobs, provided that the increase is a reasonable amount. What then is a reasonable increase? This must be analysed by considering the candidate’s current package, the market rate for similar positions as well as the current supply and demand. Based on the current market, the general annual increase in salary at MNCs in China is around 3% to 8%, therefore a potentially reasonable increase for a lawyer looking to move could vary from 10% to 30%. The percentage increase does tend to decrease as candidates get more senior and compensation gets larger.
At SSQ we regularly work with candidates who have worked with a same company for years, and they suddenly realise that their compensation is below the market rate, and thus wish to double their package by changing jobs. This tends to be very difficult to achieve. We have seen lawyers make a move with a 40% to 50% increase but this generally is due to other extraordinary elements and reasons.
Essentially how much of an increase a candidate will receive will very much be based on the result of negotiations between the company and the candidate (but it will still be within the set budget), including:
While the line manager may make the decision on which candidate to hire, the final package will be approved by the HR team as they are generally responsible for controlling the cost. The HR team will generally challenge a candidate if they are asking for a hefty increase in salary. We always advise candidates that rather than focusing purely on the salary of the next role, it is important to consider what the role will offer your career as a whole; is the platform bigger, the industry sector more promising or stimulating, the exposure larger or are there more management opportunities? All of these factors are important and should be considered on top of what the salary will offer.
Usually candidates find that the salary increase will be linked to the current market, whether the role is in private practice or in-house. Businesses will always look for the most suitable candidate as they have to consider their budget alongside the talent available. By being aware of this at the start it will help in-house lawyers to understand the market and have a realistic view of what might be available.
For in-house counsel roles MNCs generally have to hire the most suitable candidate rather than the best candidate. Most well established MNCs follow the same principles around compensation and although some of these might not be satisfying, at least they are predictable, which is helpful for the lawyers weighing up the pros and cons when planning their career. These principles however do not always translate over to domestic businesses and the situation in Chinese companies can be very different. We have seen candidates moving between domestic businesses secure much larger increases; there are far fewer rules. This does make it difficult for candidates; when you are working for an employer where there are no rules around salary, how can you plan your career path as an in-house legal counsel in the wider market where there are rules?
For more information on the in-house legal market or if you are looking for a new opportunity please contact Shawn Chen on +86 21 6103 7331 or via email [email protected].