Posted on November 9, 2012 at 12:11 AM
Some firms, especially newer firms to the Asian market, have even increased their packages to lure attorneys from their more established competitors. 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.
What does this mean for an attorney trying to make a lateral move? 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 market, and is dedicated to the market.
Ex-pat Package Must-Haves Base salary: The base salary for U.S. qualified attorneys will generally follow that of a firm’s head office, provided the candidate qualifies as a full associate. For U.K. qualified attorneys, base salary typically follows the salaries of the firm’s London office, but a handful of magic circle firms are now matching U.S. salaries for U.S. JDs. U.S. firms are offering compensation to associates that equals their New York scale salaries.
Performance and Hour-Based Bonus: Most 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.
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). 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.
Expatriate 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.
Packages in Hong Kong have remained steady during the past few years, with the top firms paying in the $60,000 to $80,000 range. While some firms do not offer ex-pat packages, the vast majority of firms still do. Benefits often include housing and moving allowances for the associate.
U.S and U.K. nationals: U.S. and U.K. lawyers with a U.S. JD or LL.B., will start at the associate level, as they would in their home country. U.S. lawyers will receive New York scale salaries that start at $160,000, which will increase based on level of experience. The majority of U.K. attorneys will receive compensation within the range that Hong Kong lawyers’ are paid domestically. Although US firms pay a higher base salary, UK firms pay their associates a larger bonus, which can be up to 50 percent of their annual salary.
Hong Kong nationals: 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. Ex-pat packages given to these associates range from HK$20,000 to HK$70,000.
Mainland China (Beijing and Shanghai)
General Considerations: Remuneration depends largely on whether the candidate is qualified in the U.S., U.K., or China as well as the attorney’s law degree, i.e. U.S. LL.M. versus U.S. JD. Ex-pat packages range from $15,000 USD to $60,000 USD. 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.
U.S. and U.K nationals: U.S. and U.K. lawyers with a U.S. JD or LL.B., will start at the associate level, as they would in their home country. The leading UK law firms in Shanghai and Beijing offer a newly qualified UK lawyer HK$85,000 per month.
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.
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.
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: U.S. firms offered salaries consistent with the New York scale that starts at $160,000 for first year lawyers. For the most part, US firms offered bonuses that were consistent with the New York model. 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.
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