High fees for juniors fail value test
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16 December 2013
It is time for firms that charge clients a premium rate for work done by inexperienced junior lawyers to reduce the charges or increase the value on offer, says Paul Newton. Paul Newton is head of legal at Bupa.
Being a lawyer myself, it is a painful admission to make that the legal profession is not particularly highly valued by British industry. One reason for this is that we have failed for so long as a profession to show that we add value.
But this is slowly changing. Lawyers are beginning to show how they can help improve the bottom line, which for many clients is all that matters.
Lawyers are able to do this by focusing more on helping clients achieve their objectives and are increasingly identifying business opportunities.
It is particularly noticeable that lawyers are beginning to offer consultancy services and are beginning to be less coy about offering business advice.
But what continues to dog solicitors is the failure to value bill for the bread and butter work they do.
Firms need to ensure that their billing is more closely aligned to the value that the client derives from the work. And this is particularly so in the case of work carried out by junior solicitors.
The fees that firms charge for junior lawyers are already too high. And the ever-increasing salary hikes for newly qualified lawyers will therefore dismay many clients, who will, like us, be bracing themselves for the inevitable increase in fees for the work they do.
Clients will always tend to view most legal work as routine and just another overhead. But the issue is one of substance and not just perception.
There is no getting away from the fact that, generally speaking, fee rates are high compared to what providers of other professional and technical services charge. This is the case even within the legal profession.
This point can be illustrated by comparing the fees charged by barristers with those charged by solicitors at the assistant solicitor level.
According to Chambers, the average hourly fee rate in London for an assistant solicitor is £196. The Bar Council's data indicates that the average hourly rate for barristers for commercial work in London is only £110 for a barrister of up to 10 years call.
These figures show that junior solicitors are appreciably more expensive than their more experienced colleagues at the bar.
This illustrates the nub of the issue - firms are tending to charge a premium rate for work done by inexperienced junior lawyers.
Clients are looking for experience and commercial nous. But in most cases newly qualified solicitors are not only inexperienced in commercial matters, they are also inexperienced in legal practice.
Newly qualified solicitors have to embark on a steep learning curve in the early years of their careers. This is not only apparent to in-house counsel, but to lay clients as well.
And a common complaint from management about external legal advisers is that the person assigned to the task was too "green".
What is more, the cost of work carried out by junior solicitors is also often increased by the cost of supervision provided by partners which, one way or another, is passed on to clients.
I am pleased to say that among the firms that we use are some of the most enlightened firms that I have come across when it comes to value billing.
But one of the main issues that we still have is the amount of the fees charged for junior solicitors. There needs to be recognition that the fees are too high and fee rates need to be adjusted to reflect more realistically their lack of experience.
It is hard to see how firms will meet the cost of the high salaries that are now beginning to be paid to newly qualified solicitors.
I find it hard to believe that firms will simply absorb the cost and let it eat into their profits. We will certainly resist any attempt to pass on to us any salary hikes for newly qualified solicitors in increased hourly rates.
These headline-grabbing salaries are certainly not sustainable in the long term. When the economy slows down - as it must - it can only end in tears.
But maybe it will help reinforce a sense of proportion when it comes to salaries, which is something some firms are in danger of losing.