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

  • Print
  • Comments (47)

Readers' comments (47)

  • 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?

    Unsuitable or offensive? Report this comment

  • @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.

    Unsuitable or offensive? Report this comment

  • 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.

    Unsuitable or offensive? Report this comment

  • 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.

    Unsuitable or offensive? Report this comment

  • 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...

    Unsuitable or offensive? Report this comment

  • 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.

    Unsuitable or offensive? Report this comment

  • 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.

    Unsuitable or offensive? Report this comment

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

    Unsuitable or offensive? Report this comment

  • 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

    Unsuitable or offensive? Report this comment

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

    Unsuitable or offensive? Report this comment

  • 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.

    Unsuitable or offensive? Report this comment

  • 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

    Unsuitable or offensive? Report this comment

  • 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.

    Unsuitable or offensive? Report this comment

  • 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.

    Unsuitable or offensive? Report this comment

  • @1:03pm - well said

    Unsuitable or offensive? Report this comment

  • @ 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.

    Unsuitable or offensive? Report this comment

  • 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.

    Unsuitable or offensive? Report this comment

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

    Unsuitable or offensive? Report this comment

  • 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.

    Unsuitable or offensive? Report this comment

  • Does anyone believe what recruiters say?

    Unsuitable or offensive? Report this comment

View results 10 per page | 20 per page | 50 per page

Have your say

Mandatory Required Fields

Mandatory

Comments that are in breach or potential breach of our terms and conditions in particular clause 8, may not be published or, if published, may subsequently be taken down. In addition we may remove any comment where a complaint is made in respect of it. These actions are at our sole discretion.

  • Print
  • Comments (47)