A top-20 City law firm has bucked the market trend and frozen junior lawyer salaries to help fund higher bonuses for high-achieving associates and partners.

Addleshaw Goddard, which is ranked 15th in the UK’s list of law firm earnings, has reallocated £1 million that would previously have been spent on higher salaries for newly qualified solicitors to a new bonus fund worth £19 million.

City law firms have been attempting to keep up with deals offered to newly qualified lawyers at the London offices of their US rivals, where the highest starting pay has hit £180,000.

However, they have struggled to keep the pace and the top starting pay at English firms peaks at £150,000. The move by Addleshaw could signal a change of strategy.

Andrew Johnston, the firm’s managing partner, confirmed that “after careful consideration” senior managers at Addleshaw Goddard had decided to keep a lid on newly qualified pay this year, meaning that junior lawyers will continue to start on salaries of £100,000.

Instead, Johnston said, the firm had boosted its bonus pot to £19 million, “which means lawyers who have contributed significantly are meaningfully rewarded”.

Johnston also addressed a growing problem for City law firms caught in pay wars over junior staff — compression between salaries for newly qualified lawyers and those who have been in practice for five or six years.

• City firms compress salary bands as newly qualified pay rockets

While salaries for newly qualified lawyers have rocketed over recent years, pay for associates has stagnated, which, according to City sources, causes resentment among more established lawyers who are now supervising junior solicitors who are earning nearly comparable wages.

Johnston said that the decision not to increase salaries for very junior lawyers at Addleshaw meant that the firm could “unwind compression between newly qualified pay and that of more experienced lawyers”.

“Whilst we recognise this is a different position to the one others are taking, we believe that we are doing what is right for our people and business, and aligning with the interests of our clients.”

He added that the cap on newly qualified pay — which was first reported on The Lawyer website — would allow the firm to maintain its trainee numbers. Last month, the website noted that Addleshaw Goddard had the largest qualifying cohort of any City law firm to announce its figures so far this year, retaining 50 of its 58 trainees.

A week ago, the firm announced that it had recorded an 11 per cent increase in annual revenue to £551 million. That resulted in average pay for full-equity partners at the firm reaching the £1 million mark for the first time in its history. The overall number of all tiers of partner at the firm rose by 16 per cent to 444.

• US law firms in London demand 70-hour weeks — for £170,000 salaries

American law firms continue to dominate the junior lawyer pay league tables in the City. Davis Polk & Wardwell, Gibson Dunn and Paul Weiss are all understood to pay their junior lawyers salaries of £180,000 on the day they qualify.

The top 27 firms in that table are all based in America, with the highest junior lawyer starting salaries at domestic firms being handed out by the so-called magic circle. A&O Shearman, Clifford Chance, Freshfields, Linklaters and Slaughter and May are all understood to pay newly qualified lawyers £150,000.

US firms also dominate the highest end of the pay league tables. Full equity partners at Kirkland & Ellis, a firm based in Chicago, are reported to earn on average £6.7 million each.

The top 17 firms in the partnership pay league table are American, with the highest-ranking domestic one being Macfarlanes, where full-equity partners earn on average £3.1 million each.

However, Slaughter and May partners are estimated to be the highest earning among the UK firms. The firm retains a traditional partnership structure and therefore is not required to make public its financial figures — but average partner pay is thought to be around £3.5 million.