Pay trainees and NQs less; pay mid-level associates more, argues influential commentator

Rookie lawyer remuneration in London may have reached unsustainable levels

Those entering the corporate legal profession are being paid too much, and the money that’s being given to them should go to mid-level associates instead, an influential legal commentator has argued.

The bold assertion — one that is bound to cause a stir among rookie lawyers — is made several paragraphs into an opinion piece by the editor-in-chief of Legal Business, Alex Novarese, who has the ear of many managing partners in the City.

Legal Cheek understands that those at the top of London’s big corporate law shops are becoming increasingly frustrated with the pressures they’re under to keep raising trainee and newly-qualified (NQ) lawyer pay — which has reached nearly £150,000 at some US firms’ London offices and pushed up magic circle money towards £90,000.

The salary inflation has been largely generated by US firm expansion in London (US firms pay young lawyers at much higher rates because in the States they arrive fully qualified burdened by higher levels of debt, and in recent years the Americans have rolled out standardised global pay scales). Since the Brexit vote, the trend has been exacerbated by the fall of the pound relative to the dollar, making the UK feel cheap to incomers from across the pond.

But a backlash against soaring NQ rates is gathering pace. Last month, in a move that implied client frustration with the rookie pay rises, Deutsche Bank announced that it would no longer pay City law firms for legal work undertaken by trainees and NQs. While such hardball tactics are a long way from being the norm, some see Deutsche Bank’s metaphorical two fingers to big-earning millennial solicitors as an inflection point.

Picking up on this theme, Novarese argues:

Trainees and junior lawyers should be paid a little less and correspondingly charged out at lower rates. Mid-level associates — the backbone of a high-quality law firm — should be paid more and charged out a little higher. Partners are paid enough but should generally be charged out at higher rates. The reason why clients always want partner time is obvious: it is subsided in terms of cost to the law firm. Client expectations of free training and discounted secondees only aggravates the pricing inefficiency and sees bluechip clients that can get the freebies effectively subsidised by the smaller clients that cannot.

Doubtless these words will find favour with many. But law firm bosses should be careful about lumping together NQs and trainees. Pay for the latter is typically in the high but not unreasonable range of £40,000-£50,000 — and if it were to drop the legal profession could quickly find itself losing top graduate talent to other City employers. That could prove an even bigger headache for those busy partners.

The Legal Cheek Firms Most List contains all the latest City law pay figures.

For all the latest commercial awareness info, and advance notification of Legal Cheek’s careers events, sign up to the Legal Cheek Hub here.

23 Comments

Anonymous

I know that for many these salaries being discussed are already very high, but I do think that Law needs to keep pace with the other City professions in terms of pay in order to attract the best talent.

I am 2 PQE at a City firm and friends who graduated the same time as me in banking are earning 3 or 4 times what I earn. I know that’s an extreme example, but even other professions with a big lead in time (ACA – 3 years studying whilst working for accountants) seem to pay more, with a better work life balance (at least amongst my friends) save for financial year end.

If I had my time again, I would definitely be a banker (even though that golden era seems to be ending, I’d still have a fat wallet by now!).

(13)(3)
Reply Report comment
Anonymous

Is that completely true re accountants? I’m sure being an associate at basically any City firm is better remunerated than an audit [manager] of the same experience at the big 4?

(19)(1)
Reply Report comment
Anonymous

Also depends on where you end up working/your own route in. There’s no way that many 2 PQEs at MC firms would earn a third or quarter of what their friends do at banks. It seems that the gap to banking at top firms is about 30% of salary, accelerating to max 50% ish in the mid associate ranks

(3)(0)
Reply Report comment
Anonymous

The match has already been lit. There’s no going back. If you can’t maintain your payscales to competitive levels, then don’t be surprised when competent applicants – who are effectively signing Faustian pacts as corporate trainees – look elsewhere.

(5)(1)
Reply Report comment
Tim

‘Unsustainable’ – The big, fancy, fashionable word that greedy pigs use to bash those less well off while they themselves are snaffling in the trough.

(16)(0)
Reply Report comment
Anonymous

1. Slow news day? Literally ripping off a sentence from someone else’s article.

2. Law firms are not homogeneous. US firms are not homogeneous. US firms are more profitable and can afford to pay rates they do and maintain parity across their offices. If some UK firms want to raise salaries too, that’s up to them and their individual profitability. In terms of junior salaries, juniors are still billing up to 10 times their salary for sacrificing up to 2-2.5k hours a year.

3. Law firms peg salaries by PQE. Many/most big law firms have very generous mid level associate salaries. Some American firms pay c. 200k to a mid level. Reed Smith pays about 90k to a senior associate. Maybe RS should restructure pay, maybe most others shouldn’t. Firms are different, non shocka.

4. Law firms operate an up or out model. That means they kick people out at a certain level of PQE. It’s right to pay juniors well to keep them motivated to work the long hours with a bugger all chance of a long term career in the firm. All trainees and juniors know their chances of becoming partner where they are currently working is infinitesimal.

5. The real money, as everyone knows, is sloshing around at partner level. If you want to improve pay, that’s where you start. PEP is going up every year, you’ve got equity partners making 2 million + at MC and US firms. To ponder about the 40k a trainee is on relative to these amounts is trifling in the context of the overall profitability of the firms.

6. Trainee pay has remained static for about nearly 15 years!!! Certainly in about 2007 Freshfields were paying 38/43k to trainees. Given that many/most are coming to law later nowadays too, not just having gone through law school, but also have paralegalled or are full on career changers, the current 40-50k actually undervalues trainees at the mega firms (particularly US which doesn’t mollycoddle them and throws them into the deep end to do real work). Whilst fine for a kid out of uni, I am just saying at present you have the sameish trainee salary at Skadden as you do at Dentons which is plainly odd.

(40)(0)
Reply Report comment
underpaid trainee

and its ridiculous considering that living costs in London is increasing every year whilst trainee pay more or less is around the same figure. if you don’t stay at a similar raggedy-ass student-ish accommodation, that will take about half of your monthly pay cheque, then compounded by transport, PAYE, tax, NIN and whatever council tax they suck out of you…life’s a bitch.

(3)(0)
Reply Report comment
Anonymous

Perhaps Alex Novarese should keep his mouth shut or focus on more important issues, such as the ridiculous cost of living in London or the extortionate LPC/BPTC fees which seem to never stop rising

(16)(0)
Reply Report comment
City trainee

I’ve spoken to US trainees/NQs who find the level of pay in London appallingly low. After tax, NI, student loan and the extortionate rents you don’t get much left over.

(5)(2)
Reply Report comment
Kirkland & Ellis NQ

How am I supposed to afford my Harley Street psychiatrist on a poxy 80k a year salary? The lithium doesn’t pay for itself you know.

(4)(0)
Reply Report comment
Anonymous

NQ’s and trainees are rubbish for clients. They need a couple of years before they become useful associates. A number of partners are bad value for money. Often its the mid-ranking associates who drive the G.M. of a department to a decent ratio. Can see some sense in this proposal.

(0)(3)
Reply Report comment
Anonymous

Fundamentally untrue. Some trainees and NQs are excellent and outperform junior/mid-levels, some mid-levels are poor. Experience isn’t everything.

(0)(1)
Reply Report comment

Leave a comment

Your email address will not be published.