Many newly qualified solicitors in US and magic circle firms now earn more than district judges. Quinn Emanuel Urquhart & Sullivan and Gibson Dunn & Crutcher lead the way with £180,000.

Headlines on NQ salary wars sit adjacent to news that clients now pay 40% more in fees to top UK law firms than five years ago: an unfortunate juxtaposition for the readers responsible for paying those bills.

While firms justify NQ salaries as necessary to ‘attract the best talent’, clients look upon the latest pay hikes with a jaundiced eye. Speaking with senior GCs across business sectors, there was a consensus that perpetual rises were unsustainable. Typical responses include:

  • ‘They are paid too much and do not have the experience.’
  • ‘Errors are made which can make a transaction more fractious, and we pay for those mistakes.’
  • ‘NQs are good on technical stuff like time limits, but can trip up on negotiations because they do not have enough exposure to how things work in the real world.’
  • ‘Earning so much could prevent NQs from asking for advice from their seniors, or admitting a mistake to the client.’

In-house lawyers feel that NQ salaries in private practice devalue their sector because an equivalent wage in-house would be a senior lawyer with significant experience and responsibility.

I have also regularly heard concerns about whether putting so much pressure on inexperienced young lawyers is good for their mental health, with questions about how this aligns with law firm commitments to building supportive cultures.

Competition over ever-inflating NQ pay is a long-running saga in the legal market and is accepted as an unfortunate ‘fact of life’ by in-house counsel. But there are factors in play that could lead to a change, not least the dramatic impact of technology.

First, investment in artificial intelligence and other tech tools has the potential to revolutionise legal practice. Clients are already asking why they should pay for an NQ to remind them of time limits on procedures when this information can be provided by technology.

Digital transformation of the legal market is likely to lead to a push for lower fees. Stagnation is also a possibility, as clients resist more and more inflation-busting escalations in the face of firms promoting their money-saving tech innovations.

Second, in emergent business sectors, the GC’s status tends to be more influential than in a dispersed multinational. Tech start-ups and crypto platforms tend to sit GCs alongside decision-makers, instead of being considered a service line.

As start-ups and more innovative businesses grow and take more market share, will this provide an opportunity for mid-market firms to step in?

‘There are smaller firms capable of disrupting the market that give as good, if not better, advice than magic circle firms,’ says one former senior GC of world-leading technology companies. ‘The problem is that in-house lawyers need to be supported by the CEO in their choices. There is a risk for them in using lesser-known firms.’  

Third, while US and magic circle law firms battle over NQs, there is discontent brewing in the squeezed band of associates who are just above them in the pecking order – some of whom are only earning £10,000 more than NQs.

Adam Zdravkovic, an in-house recruiter for Think Legal Recruitment, specialises in the north-west market. Law firms in this region have recently boosted their NQ salaries in response to developments in London, an inevitable consequence of staying competitive nationally.

‘Lawyers in the five-10-year bracket are under a lot of pressure,’ he says. ‘They have the experience but are not paid much more than the newly qualifieds who don’t.’

Now these associates are picking up the phone and looking for a better quality of life in-house, Zdravkovic says. While there is always attrition among associates and moving in-house can be useful to private practice, how many is too many?

Clients have been complaining about NQ salaries and the battle for the best talent since the arrival of US firms 25 years ago. Until now, no one could do much about it except pay the bill and demand more and more from their firms in return. Over the past two decades, there have always been reasons for clients to hope that common sense would prevail and salaries would bottom out. Now technology looks the most promising lifeline for GCs to redress the power balance.

 

This first article in this series appeared on 22 November 2024

 

Katharine Freeland is a freelance journalist