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

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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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