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

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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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