City firms should slash NQ salaries to £50,000, say recruiters

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  • Heh!

    Perhaps the way to stop the exodus of staff from city firms at the end of their training contracts is to stop beasting them, rather than pay them less?

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  • Of course, NQ salaries at top City firms have already fallen by approx 6-10% since 2007/2008, before taking into account inflation and despite miniscule uplift over the last two years. NQs at such firms took a hit when the £64-66k mark was reduced to circa £59k in 2009. And how does lowering salaries prevent the exodus to the regions/in-house?

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  • Call me a cynic but it looks like legal recruitment firm Edwards Gibson have advised attendees to undertake a course of action that will only increase the migration of NQs to regional firms and in-house legal teams. Why would they want to do that?

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  • So reducing salaries will stop an exodus? Surely this will lead to more moving in house as the key motivation for many to stay in PP for the money will be lost. I say raise the salaries if the issue is people deserting the city...however, it's not the real issue. The real issue is less work means less productivity which means less demand which means less cost. Don't make this issue into something else.

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  • "Say recruiters." Say the guys who couldn't get into law or couldn't hack it while they were there. If anything, a good NQ with sufficient work is underpaid, not the other way around.

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  • If I understand it right the suggestion is that in certain practice areas clients are deserting the City firms in favour of larger in-house teams and/ or cheaper regional practices - presumably the reason Edwards Gibson would give is that this is largely cost-driven. And their proposed solution is to pay NQs less?

    If my assumption of what Edwards Gibson are saying is correct then that presumably means that the element of a bill on a particular matter that relates to time spent by NQs will reduce by 17% or so to reflect the lower salaries paid (60k - 50k) - always assuming of course that Big Law will pass on the reduced cost of NQ salaries!

    Surely when all other costs remain the same that means the overall reduction in costs to a client on any given matter will be minimal under this proposal - and presumably not enough to make clients consider a revision of the flow of work away from Big Law in certain practice areas if we are to assume it's purely cost-driven (which it isn't anyway).

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  • I love the fact that NQs think they can get jobs in the regions for this much. Oh I cant earn this in the City so I will move to the provinces. Get real folks - major regional firms at 5 PQE are only just (if you get a good one) paying this level!

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  • Perhaps it's how the story has been reported, but I am struggling to see how reducing salaries will prevent a jobs exodus. I can see how a failure to reduce salaries might increase work being "northsourced/shored", but that's not quite the same as a "jobs exodus" as reported here.

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  • How about Partners take a cut in their salary/drawings and the trainees who are on a tenth of those salaries keep there's the same?? No, I didn't thing a recruiter (who relies on extortionate bonuses, approved by said partners) would suggest such a thing!

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  • No doubt the article is suggesting that the work is being farmed out to the regions and not the NQs themselves. Pay less, charge less and keep the matters.

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  • @ Anonymous | 20-Mar-2013 1:49 pm
    I agree with you. I think that is exactly what the article is trying to say, but has been poorly written by the reporter which has led to the confusion experienced by the above posters.

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  • Edwards Gibson can officially jog on. It has never been tougher to become a trainee solicitor and you're suggesting to the profession that they reward those few who are successful with pay cuts? What a wonderful idea. If I didn't already have a training contract I would definitely be looking at other careers at this stage. When all you see every week is depressing news about how miserably difficult and uncertain life is for newly aspiring lawyers you can't help but be put off.

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  • I honestly cannot see how a reduction in salaries will stop an exodus to the provinces / in-house.
    First, the motivation for PP is different to the motivation for in-house. Second, simple market economics would dictate that, to attract / retain the best, you would offer more - or better conditions - than less. Third, from experience, there is a valid reason why people choose regional practise ... and it's not the cash!
    More to the point, if the logic as reported in this article is true of Edwards Gibson, I would not like to be represented by them.

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  • The article is a bit unclear but i think the crux of it is that clients are unwilling to pay lots of £ for what essentially is a very junior recently qualified lawyer. It's true that in the city the fees can double in a matter of days once a "trainee has qualified" - when in reality, they're not getting twice the value.
    Although i don't think this is a pragmatic solution to the problem because able prospective candidates will just go into banking if the salaries get any lower. When you work out how many hours junior associates are working - they're probably getting little more than minimum wage...

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  • Yeah, reduce NQ salaries by 20% or so so it takes young lawyers even longer to pay off the ever increasing level of debt they've incurred by the time they've qualified to put themselves through university and law school.
    Edwards Gibson, I'm never coming to you when I want a job. You'll no doubt tell a potential employer to offer me less than they might otherwise have done!

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  • I'm very confused, how does cutting salaries for NQs in the City halt a jobs exodus to the regions. Surely, it increases it?
    From a client's perspective (and frankly when I was in PP), the thing that shocks me is not the salaries for NQs it's their charge out rates. Those charge out rates are set by the partners. If they want to see work flow in from the regions, they should cut the charge out rates....

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  • "City" law is in for a very rude awakening over the next few years, as are professional services companies generally, caught in a pincer of accelerating technological change, globalisation, offshoring, outsourcing and consolidation.
    IT is going to enable ever more processisation and automation, and make physical location ever less important (video conferencing is on the verge of becoming both far more common and far more effective, artificial intelligence will soon reach the point of being able to actually read text and draft documents).
    Globalisation is going to flatten the industry, forcing wages in the UK and places like India much closer together.
    Outsourcing, offshoring and use of support offices in low cost centres will all continue to grow as firms which fail to utilise them will be placed in a worsening competitive position. Maximising the use of these opportunities will also drive consolidation, which will in turn drive further outsourcing, offshoring and use of support offices.
    The ultimate effect of these trends will be far fewer lawyers working in London, and for lower salaries. Things wont look radically different in two years times but they will in 10, and in 20 they will be unrecognisable.

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  • Is this a joke? It is truely the first time I have ever heard someone suggest cutting the pay will keep people in the city... Surely lower pay will make being a in-house laweyer more attractive?

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  • If clients object to paying NQ salaries you wonder how they feel about the fees charged by recruiters for placing job ads and forwarding emails.

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  • @Paul in Sheffield: you've missed the point. It's not the NQs who will move to the regions, it's the NQ JOBS. No firm is short of NQ applicants.
    @JohnintheCity Many clients don't like paying a lot for NQ work because they don't rate NQ experience and expertises (understandably). The same doesn't apply for more senior lawyers. This isn't about fairness, it's about responding to what clients say. (Or more accurately, what Edwards Gibson say they say).

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  • Would someone from Edward Gibson or The Lawyer like to reply as there are a good number of people here who just don't get what is being reported (myself included!). Has The lawyer mis reported, or do EG stand by the claim as reported?

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  • @Anonymous 11.18am The argument put forward at the seminar is that because clients are increasingly disgruntled with what they see as over-inflated salaries of NQs, they will either be taking work in-house or disaggregating it to lower-cost centres, thereby depriving City firms of fees.
    The logic goes that if City firms slash their cost bases in the form of junior salaries, jobs can be saved in the long run. It's a provocative argument but its causality is debatable. However, there's no doubt that many in-house lawyers are resentful at funding what they see as an overpaid tranche of junior City professionals.

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  • Point seems clear, if not clearly reported:

    - clients do not want to pay high rates for NQs
    - London firms need to cut NQ charge-out rates
    - London firms need to cut NQ salaries to reflect reduced charge-out rates

    First two points seem uncontroversial. Third point is controversial - easily arguable that same effect could be achieved by partners seeking less "profit".

    What will be more interesting to see is whether this article is merely a bellwether for announcements from City law firms over the next few months. Certainly much easier to move in this direction if this is what the "market" is saying.

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  • In the current market it really should be no surprise that fewer clients are willing to pay £300/hour for a City NQ. Much of the work done by these NQ’s can be done cheaper elsewhere in the UK, outside the UK, by a semi-literate paralegal or trainee, or simply not done at all. Any responsible client could question, quite rightly, what value someone at that cost with minimal legal or business experience adds. There are hardly any other professions which would tolerate the sort of pay differentials that exist between City firms and the regional firms. Most businesses do not pay 40-50% London weightings to their own staff or management and might well question why that is needed for their advisers. There will be skills and capacity in the City that are not available elsewhere but is the difference that stark at NQ level?

    In previous years when salaries have jumped up (e.g. 1999/2000) this was driven by an excess of work and lack of people i.e. market forces. Those same forces are now pushing salaries downwards. The fees brought in need to pay the bills, pay the staff and keep the partners in whatever lifestyle they decide they require. If the fees go down, everything else takes a haircut. Moan about how fair or otherwise that might be if you like. If that business model repels you, though, working in private practice doing commercial law of any kind is not the right career choice.

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  • This article is not saying cutting pay will keep people in the City. It is suggesting that cutting pay will keep clients, and therefore work, in the City.

    The premise is that lower pay, means lower costs, means lower charge rates, which makes it more attractive to clients.

    Premise-killers:
    1. why only reduction of NQ pay, not everyone's?
    2. reduction in pay is unlikely to equate a reduction in rate (been there, seen that - not!)
    3. the bulk of service charges to the client are driven by the senior people who oversee/supervise/approve the work of the juniors. Pound for pound, the cost of a junior compared to a senior is usually not proportional to the charge rate for a junior cf. a senior.

    This seems ill-founded to me. These HR advisors don't have me convinced...

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  • The HR guy quoted in this article clearly has no idea what he is talking about. Why would being paid a higher wage be compelling NQs to find a move in house or to the regions more attractive? Why would clients be put off the NQ being paid that wage? Clients don't pay the wage. They pay the charge out rate. Which bears little or no resemblance to what an NQ is paid. If charge out rates are too high, leading to clients putting work outside of the City, that is a completely different consideration. Ultimately, were that the case, market forces might dictate a lowering of wages, were the firms that bothered about the loss of the nature of business being resourced in that way. But what this guy wants is to be able to make a percentage of salary for putting out of work NQs into the highest paid jobs he possibly can do (at a City firm). Those firms are taking a conservative view on NQ retention, focussed on quality rather than volume. This guy wants to have more NQ positions at a slightly lower cost to firms so he can get greater results and a much fatter wallet. Simples.

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  • Catrin - thanks for the clarification. Perhaps, in hindsight, the piece should have read along the lines of "Salaries need to come down in order to stop more work being kept In House or being sent up the M1/M6" as its about the distribution of work, not a jobs exodus in the commonly understood meaning of the phrase. Any work being sent to Manchester/Leeds/Birmingham is more likely to see hires being made from within those markets, not through an "exodus" of lawyers from the City.
    The day I hear a City lawyer saying they want to come Oop North "because that's where the work is" will be the day I reduce the height between my chair and the floor in order to ensure a softer landing when I fall off said chair laughing.

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  • Actually, says ONE recruiter. Hardly a cry from the recruitment industry is it? More a sound bite from one in-house specialist...

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  • Actually, what is interesting in this comments thread is the widespread lack of understanding of law firm economics. Amazing how many posters see things only from the point of view of associates competing for employment/salaries and not from the perspective of the firm attracting and keeping clients and workin out what to charge them.

    The article itself is not crystal clear and the recruiters' argument is tenuous but if these commenters are lawyers (or want to be) they should have a brush up on their commercial awareness and start thinking like future partners

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  • This article is the start of a "kite flying" exercise on the reduction of salary costs by City firms. Just you wait and watch...

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  • We would like to clarify what appears to be some confusion over a breakfast seminar we presented on Wednesday 20th March to a number of HR professionals, entitled How high headline salaries and inflexible compensation structures are harming London law firm competitiveness and costing City lawyers jobs. Some of the comments following the posting of the article point to a perceived attack on lawyers, especially at the junior level.
    Ironically, our presentation had at its core a fundamental desire to see London law firms maintain competitiveness and perform well in what is undoubtedly one of the most challenging landscapes in a generation and for City lawyers to have a more sustainable future and the prospect of long careers in the law, should they choose.

    Based on a detailed and thorough examination of the London market (as well as a comparison with the US market) and on trends and metrics associated with the dramatic rise in both numbers and expertise of the in-house legal function, the resultant loss to London law firms of hundreds of millions of pounds of non-premium work and the increasing use of outsourcing and near-shoring for this work. We submitted that unless some firms consider the way they compensate a number of their lawyers, in non-premium practice areas, they will simply not be able to effectively complete for certain types of work nor grow at a rate that supports the numbers of lawyers entering the profession. The market for law firm legal services in London has shrunk (the most up-to-date figures indicate by about 14% in real terms) which has already resulted in fewer opportunities to enter, and remain in the profession than previously existed. For newly qualified lawyers it won’t so much be a question of accepting a lesser salary, it will be a question of whether junior lawyers are able to secure training contracts or newly qualified roles at all.

    To be clear, our presentation was not exclusively aimed at newly qualified or even junior lawyers but rather at proposing a change to compensation regimes in non-premium practice areas which, as a matter of fact, are becoming less and less the preserve of City law firms. To this end we floated some ideas that might enable these firms to continue to profitably maintain certain practice areas in London rather than, as is increasingly happening, outsourcing/near-shoring work out of London or simply dumping whole practice areas altogether (something Magic Circle firms had commenced a decade ago which in turn spread through the Silver Circle and now into medium sized City firms).
    To City firms we believe maintaining these practice areas in London provides certain inherent efficiencies for their business and mitigates the risk to them of “brand pollution” arising from outsourcing/near-shoring/ using contract lawyers or indeed losing clients through being unable to fully service their needs.

    As an aside we consider that our suggestion may help slow the reduction in the numbers of full time lawyers working in City firms in certain practice areas. To be clear, our suggestion is that that law firms could pay lawyers more in areas where they are competing with firms higher up the value pyramid (in more profitable disciplines) and pay lawyers less where they can command less (less profitable practice areas) where the firms in different positions on the value pyramid are not seeking to compete for free standing work and hence talent.

    On our website, under “Market Updates”, is a summary of the presentation and full slide show which may clarify the premise of our suggestion.

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  • What an absoluttely terribly written article.

    As others have said - presumably it means to say that clients are taking work to the regions because of the high city fees caused (apparently) by high NQ salaries. Decreasing city salaries for NQ's can only mean one thing - further exodus to the regions.

    I hate reading tripe

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  • So, minus the management jargon, you're basically saying that non premium work is being done for less by firms outside of London with lower costs. Firms should therefore pay NQs in certain practice areas less to make their costing more competitive.

    Three things:

    1. As others have eloquently explained, there are far more effective ways to reduce costs.

    2. Linked to point 1; cutting NQ salaries by £10k would not save enough to make London firms competitive in non premium fields. One might therefore suggest that London firms should only do premium work.

    3. It's unfortunately inevitable that the London legal market will shrink because its huge expansion was linked to the debt fuelled economic growth which is unravelling.

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  • Junior lawyers are overpaid: fact.
    The NQ salaries at my previous (top 100, West End) firm were about half of what I, as a salaried/fixed share partner with 18 years experience in my specialist field was earning - something which might well come as a surprise to those NQs – and I believe I was one of the better paid non-equity partners there. Absolutely no bitterness on my part. When I compare my salary to what other professionals – nurses, teachers etc are earning – I can only thank my lucky stars for having been around in what will be seen in the future as halcyon days for the profession.
    How did this junior lawyer wage inflation occur? Well to refresh people’s memories (or rather to inform many of the commentators who from their comments were clearly at home watching Blue Peter at the time) it was caused about 14 years ago by American firms trying to barge their way into the market quickly. Some of them came a cropper. Altheimer & Gray? Remember them?
    http://www.thelawyer.com/the-final-dark-days-of-the-firm-that-wanted-too-much/106473.article
    Some of them toddled off back to the states with their tails between their legs, unless worse befell them. However, by then the damage was done.
    I really sympathise with new qualifiers/0-5 PQE. They have made sacrifices and borrowed heavily to pursue that pot of gold at the end of the rainbow which just isn’t going to be there any more. The rebalancing of the market which is coming is going to be very painful, as they always are, and for everyone. I have done everything I can to try to dissuade my two sons from going into the law.
    The profession is facing unprecedented challenges in terms of competition and client expectation. Lawyers, junior and senior, have to face these facts, or everything they do is just going to be deckchair rearrangement.

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  • @1:03pm - well said

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  • @ Edward Gibson - yes, I get all that and thanks for the clarification. However the article says "the drift of lawyers away from London firms...to the regions" and talks within the same breath of a "jobs exodus".

    Regional firms have always welcomed new blood relocating from the City, indeed such candidates have traditionally been highly sought after. It has always struck me that there has been a steady - and very welcome - trickle of this type of candidate coming onto the market. In most cases the move is triggered by domestic circumstances - the lawyers in question often want to come back "home" upon becoming parents, or just want a (larger) home of their own. Unless I am missing something (and I'd welcome input from others if I am), I think the trickle may have become a bit heavier in the economic downturn, but I don't think it's an "exodus" as such. Furthermore, whilst work "near shored" has in many cases been absorbed by regional offices which may previously have been under utilised. So I think the point about City firms having to adapt is valid, but I'd question talk of an exodus.

    In short, I don't see scores of would be lawyerly Dick Whiitingtons making an about face to hit the gold paved streets of Manchester and Leeds.

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  • I love being a recruiter. We can talk loads of guff, no one like us but those same people can’t survive without us. Last year I took home more than pretty much any partner in the UK. Not too shabby for a boy who didn't complete his GCSEs. Off topic I know, just love seeing it in writing.

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  • @ 5:15 pm well done, go get yourself a biscuit

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  • Fact is that £55k for someone at the very start of their career and thus knows precisely zero is way too much. Sorry chaps, £35k is probably more the ticket.

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  • Does anyone believe what recruiters say?

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  • @1.38 a bit harsh surely to say an NQ knows precisely zero. Also, and more to the point, they do earn £35K when they 'know precisely zero' as a first seat trainee.

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  • Re anon @ 5:15pm;
    Given that most people take recruiters' tip-offs and apply direct and following the rise in mediums such as LinkedIn (where jobs can be better promoted for free), I'd be a bit more concerned with how to survive long-term rather than gloating about your alleged significant earnings.

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  • Re I'd rather be... @5.34
    I feel terrible for writing my comment; I don't know what came over me! Perhaps it was the liquid lunch and a feeling that the agency was getting a bit too much stick for what was not an unreasonable opinion (I don't agree with it but I see their point).
    I have been hearing about the end of recruitment since 1995 whilst watching our turnover and profit rise every year. I agree that the current recruiters days are numbered but the reasons you give are wrong. Every 10 years or so firms install internal recruitment teams headed by someone from outside of the industry who can’t comprehend the difference between recruiting an ep and a secretary and whose only goal is cutting costs. This means the skilled recruiters move away from these firms which paves the way for the CV factories to fill the void. This type of recruitment is a sordid affair for all involved (candidate, client and agent) and doesn’t really work. Once they have trampled all over the market and failed the firms come back to us to conduct a search at a higher percentage and pay us up front. Eventually the in-house teams will be made redundant again and we go back to working with partners and regain control.
    Linkedin won’t help as that relies on people looking for a job and the majority of people we move are not. If people back door us we couldn’t care less, the firm has paid us to manage the process so they will be sent straight back to us with egg on their face.
    A frustration that lawyers have is that your clients don’t understand what you do, the same applies to us. What we do is a skill and helps firms grow, saves jobs and furthers the market as a whole. Deals (including some of the largest mergers you see) will not happen without us. The reasons for this are numerous. The main one being that it is the won't of Lawyers to be stubborn, non-committal and very guarded. When you have two parties behaving in this way this with no guidance deals won’t happen.
    The level of patience and diplomacy required to succeed is difficult to comprehend and is a rare trait. This is why our mobile numbers are in the Managing Partnerr’s phones and why they sign off invoices of 500k. We are remunerated according to our contribution to the firm; I would argue that our contribution is as great as the majority of partners which is why we earn what we do.

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  • I think people are mistaking the "exodus" as referring to people (NQs) whereas it surely really refers to the work. The high cost of relatively low level work being undertaken by relatively inexperienced people (which is partly salary, but partly other factors such as real estate) is driving law firms' clients to look to alternatives where they can. And with regional firms grasping for work, lower cost centres in Bristol and Belfast, and new providers entering the market there are plenty of easy pickings.
    Retention is less the problem these days - there is now an oversupply of lawyers, not a shortage.

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  • This thread just serves to demonstrate the profile of people who blog on the lawyer's website. The market is about to change hugely as a result of LPOs and the advent of the ABS. For the doubters among you have a read of Susskind's observations on this topic. In Law Firms, wages account for circa 40 - 50% of the cost base, followed by premises. The observations of the recruitment firm are well placed (albeit that they focus solely on one aspect of the challenges facing firms). To stay competitive firms will have to reduce costs. Wages is the first place you'd expect them to look and the NQ rate is an easy target as it is difficult to justify the charge out rate for someone just out of nappies. Change is coming....

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  • This guy also seems to assume that clients are well aware of the charge-out AND/OR salary increase that comes with qualification.
    I didn't qualify into my final seat, so I never saw those clients again (except for some of the bigger ones, dealing with a different team anyway). I would say the majority of trainees don't qualify into their final seat either. These client's won't get a chance to comb through the invoices to look for a change in job title and a corresponding hike in price. I'll just be gone. And a new trainee will join! Simple.
    And nobody seems to understand that the author isn't really suggesting that NQ's as PEOPLE will move to the Regions, but that an increase in demand for lower-cost Regional legal services of comparable quality to those in the City will lead to a rise in demand for NQs in the Regions.
    And nobody picks up on the qualification: " in non-premium areas". I for one would be glad to know that Mr. Employment-gets-out-the-door-at-5:30-and-bills-half-as-much doesn't earn the same wedge as the sleep-deprived, caffeine-ravaged lawyers in corporate. Earnings HAVE to start reflecting recordings.

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  • As a legal recruiter I am ashamed to be associated with the likes of Mr "I earn as much as the Partners". It is ridiculous to suggest that smarter in-house teams and the rise of social media have not majorely impacted the need for external recruitment assistance.
    The vast majority of professionals are now listed on Linkedin making it far easier to source candidates and make approaches. This month Amazon announced that they have cut their use of external recruiters down to just 9% of hires. As the larger organisation improve their internal recruiting systems it follows suit that so will the smaller organisation such as law firms.
    It is worth noting that social media did not exist in 1995 so the comparison between then and now is void. Social media has dramatically altered the way in which businesses are able to interact with potential employees.
    We have good salaries because we do a job which not many people are comfortable doing. It is the same with all sales jobs and recruiters should not forget that they are sales people. The difference being that our products are people who are changeable and have free will. Our work ethic may be comparable with that of a lawyer but our job is not skilled in the way a lawyer's is.
    Good recruiters do have value in that they know the candidate market, understand client needs and can quickly and efficiently source talent for a business, there is no reason other than cost savings that these skills can not be incorporated into an in-house setting. It is just that currently in-house recruiters are not paid enough for them to work in the sales orientated way that external recruiters do.
    The article produced by Edwards Gibson is more akin to something produced by a consultancy firm and perhaps Edwards Gibson are lining themselves up for a change in business direction in the wake of the social media revolution.
    Recruiters such as yourself should think about how you can be more commercial rather than burying your head in the sand and pretending that things aren't changing.

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