Housing / COLA Allowances in HK and China on the Rise Again
Robert Kinney here. There is nothing like expat package discussion to get our readership up. It seems like we have recently written on this topic, but there has since then continued to be an uptick in housing / cola, as well as a lot of momentum for a cross the board market shift upwards regarding what is considered a competitive expat / cola allowance in HK / China. First, please check out our recent press at CNBC, where our Alexis Lamb is the only recruiter interviewed for the March 7 ’11 article “Law Graduates Head to Asia as IPO, M&A Boom Creates Talent Shortage,” by Ansuya Harjan. We will be featured / interviewed in several other national and global publications regarding Asia biglaw in April as well. 
Usually when the top US or UK firms in HK / China are considering an expat / cola raise, they will contact Robert Kinney, Alexis Lamb, Yuliya Vinokurova and / or me for information on other expat / cola allowances in the markets, recent changes we have seen, and what we are expecting in the near to medium-term future. We have been taking such calls on a just about daily basis recently. Why are we such a great source of information for these hiring partners? Well, it is known that we are the market leaders and are the most informed recruiters in the HK / China biglaw market and each year we see offer letters from just about every top US or UK firm in HK / China. Routinely, Robert and I are asked to meet with senior partners in both Hong Kong and New York in order to discuss the state of the lateral hiring market in Asia, including cola / housing allowances. Here is the recent movement we have seen in expat / cola (amounts below do not include sometimes substantial additions for associates with children) in HK / China: Top Wall St. firms: One of these firms has for most of the past five years, including at present, offered its US associates $80,000 USD expat / cola. Up until recently this number has been top market, but in the past six months we have seen several non Wall St. firms blow past that number, including one firm that is $25,000 ahead. The other top Wall St. firms have had expat / cola ranging from $55,000 to $70,000 for the past five years and there was no change in these numbers during the recession or the dramatic boom recovery in China in the past two years. However, things are changing: One top Wall St. firm has just raised its housing / cola from 65k to 75k and two other top Wall St. firms are seriously contemplating raising their expat / cola to over 70k and perhaps to 80k. Other top US firms: This is where most of the recent dramatic housing / cola increases have occurred recently. One of these firms has blown past the rest of the market with a $93,000 housing / cola for single associates and $105,000 expat / cola for married associates. Another firm has raised its expat / cola to $80,000. Both of these firms though have always been very competitive in the HK / China market since they opened their doors, so not so surprising. However, a number of other major US firms which for years were not willing to pay competitive market housing / cola in HK / China are now suddenly offering $80,000 to $95,000 range of allowances. It has been the dramatic upwards movement in housing / cola in HK / China that has really rocked the market. Keep in mind that during the past twenty months, while things have been booming in HK / China biglaw, especially in HK and China IPOs, most of the top US cap markets practices in HK / China have been incredibly busy and also understaffed (due to hiring freezes for ’09 and less than full green light hiring for most of ’10). The hours have been very high and some associates at the traditionally most prestigious firms have begun to consider firm prestige as a less important factor than good work, career advancement potential and compensation. There is more open competition for the best associate candidates and thus with more firms in this competition, brings about more firms with top market expat / cola allowances. During ’09 and the first half of ’10, all international firms in HK / China could count on stellar US associate candidates applying for each opening, but once the number of openings vastly increased in the market, the top candidates on paper (from top 10 NYC firms, native Mandarin, cap markets / M&A) became relatively scarce, as is usually the case. Most top US firms will strive to hire the best available candidates available on the market at any particular time. The vast majority of the partners at US corporate practices in HK / China want high housing / cola for their associates so that they can recruit the best talent. Surprisingly, a lot of US firms’ global management is starting to agree wholeheartedly. Keep in mind that there is also a recruiting race / war going on now in HK / China for senior and rising star partners with huge books of business. These star partners who are open to a move don’t want to join (or remain at) firms that can’t recruit the best talent (so expat / cola allowances for their associates are vital to these partners’ needs too). Further, the cost of housing is on the rise in HK, which ironically is not the most important factor in these cola / housing allowances, but it is an increasingly important factor, as HK landlords in Central and Mid-Levels are asking as much as a 100% increase on lease renewals recently. With the above said, there are still is a number of US firms that refuse to pay competitive expat / cola allowances in HK / China. This number is shrinking but the majority of firms in this group are resolved to not consider high housing / cola allowances. This group includes a few major names that may surprise you, if you did not know the market well. These firms fall into two categories: a) firms that have a strong particular practice in the region and have for years, but have no desire to expand significantly and their clients are going to keep coming to the senior attorneys they have worked with for years; and b) firms that are trying to survive in HK / China by competing on price and thus have small margins to work with, certainly not the kind that would allow the high expat / cola allowances. Magic Circle and other UK firms: Up until recently three of the four magic circle firms have been very competitive with expat / cola for years in HK / China, offering a range of 63k to 79k for since ’07. However, the fourth magic circle firm has also recently joined the competitive housing / cola range, offering as much as 70k allowances recently. A few other UK firms are competitive and others are not. The magic circle firms have become very competitive with the top US firms for US associate candidates in the past two years in HK / China and we don’t see that changing. We expect these firms to raise to 75 to 80k housing / cola if 3 or more of the Wall St. firms do. Additions for children: Most top US and UK firms which pay competitive housing / cola in HK / China will also provide substantial additional allowances for US associates with children. These additions can range from $10,000 to as much as $80,000, depending on the firm. Also, a growing minority of top US firms also provide tuition reimbursement assistance for associates with school aged children. This is critical for associate with multiple children in school because the cost can easily be over $20,000 per child per year. A handful of firms provide full reimbursement, but the market seems to be settling on $10,000 reimbursement per year per child. We believe that this $10,000 reimbursement will catch on and eventually be offered by the majority of firms (although it may take a couple of years for a majority of firms to offer this). Keep in mind that a handful of firms in HK / China offer their housing / cola allowances on a case-by-case basis (rather than have a set policy for a certain allowance across the board for all US associates) and they of course take into account whether an associate has children. As always, feel free to reach out to us at asia@kinneyrecruiting.com if you have questions regarding housing / cola or any other topics with regard to the Asia biglaw markets.
Robert here. Apologies for no new post last week, as Robert and I have been extremely busy and also traveling quite a bit. Our Asia team as a whole, including Yuliya Vinokurova, Robert and me, are representing more qualified US biglaw attorney candidates for Asia than at any other time prior. While some of these even highly qualified candidates will be on a longer term job search involuntarily (due to the market), and others are contacting us with plans to move to Asia in a year or two (over half of our Asia placements have been of US associates that contacted us a year or more before starting a job search), we are seeing a surge in active interviews and hiring in Asia, especially Hong Kong / China, for our most qualified candidates. Things continue to pick up dramatically in the China economy, as a successful stimilus and increased lending are helping the stock indexes in HK / China surge. The Shanghai Index has now doubled its global recession low in November '08. The Shanghai Index is the world's best performing stock market, having gained 89% this year thus far. Earlier this month, China briefly overtook Japan as the world's second largest stock market by value and is likely to soon overtake Japan indefinitely. Atlhough there will most likely be a correction in the market later this year, with stocks in China being too expenseive, on average trading at 37 times earnings, it is clear that China's domestic economy is quite strong, on the rebound, and growing rapidly. I say the domestic economy because there is a perception out there that China's economy is heavily reliant on exports to the west, but in reality it is becoming more and more of a consumer driven economy. For example, consumers in China now buy more new cars and gold than any other country in the world and not so long ago it would have been unthinkable that the US and India would not be those leaders, repsectively, indefinitely. Some countries, such as Australia for example, have become quite reliant on exports to China rather than vice versa. While of course, the China economy benefits greatly from the US and other Western markets importing goods from China, and there is of course a very substantial manufacturing industry in China that relies on demand from west, there has been some decoupling of China's economy from the US economy. The global downturn has made this reality more clear and has surprised many economic experts that felt certain that China's economy would suffer a major and long-term blow from the serious recession in western markets.