Market Focus

In part two of our autumn 2019 retentions round-up, we report on the latest announcements by leading firms, some notable NQ salary increases and an interesting statistic revealed by Eversheds Sutherland. (read part one here)

Global firm Eversheds Sutherland added some attention-grabbing spin to its retention announcement this autumn. As well as stating that 39 out of its 49 NQs are staying put (80%), the firm revealed that 70% of these are female and 26% are Black, Asian and Minority Ethnic (BAME). This compares to its BAME figure of 18% in 2018.

Evershed Sutherland’s HR director Lorraine Kilborn said: “We strive to attract individuals from a range of backgrounds and perspectives, unlocking talent that can provide us with a competitive edge in an increasingly global legal market.”

Perhaps this announcement is a sign of things to come and something other firms will follow. Or perhaps not.

Macfarlanes has repeated its perfect spring 2019 retention score, with all 25 of its NQs remaining at the firm. They will start on a newly boosted basic salary of £85,000 per annum with the opportunity to earn between £98,600 and £110,250 once individual and firm-wide bonuses are taken into account. The firm says 98% of its staff received bonuses last year.

International firm Hogan Lovells is retaining 28 out of 31 of its qualifying lawyers this autumn (90%), two in Birmingham and the remainder in London. The London qualifiers will start on £90,000.

The London office of Ashurst is keeping on 20 out its 24 NQs (83%), a slight dip from its 93% this time last year. They will start on £84,000 although this could rise to £105,000 depending on bonuses.

International outfit Stephenson Harwood has revealed an impressive score of 92% in its London office, with all but one of its 13 qualifiers accepting offers to stay with the firm. They will start on £75,000, a figure that could go as high as £97,500 once bonuses are factored in.

Clyde & Co meanwhile is retaining 37 of its 43 trainees (86%) of whom 33 will be based in London, three in Manchester and one in Guildford. It too is upping NQ pay, in this case to £70,000 (an uplift from £65,000).

There has been a flurry of pay hikes for NQs in recent weeks. There will be smiling faces at US firm Dechert, which has boosted salaries for its London-based NQs to £116,000 from an already impressive £100,000. As if things couldn’t get any better, lawyers at the firm are now allowed to wear jeans to work. The firm believes this is about “inclusivity, empowering our people, and attracting the best talent”.

NQs at Addleshaw Goddard will now be on £75,000, which places themselves alongside their counterparts at Bryan Cave Leighton Paisner, Dentons, K&L Gates and Stephenson Harwood and £2,000 ahead of those at CMS and Squire Patton Boggs.

Gowling WLG has raised NQ pay to slightly below this level for its London lawyers (£71,000 from £66,000) and £44,000 for those in Birmingham (up from £42,500). This brings its London NQs alongside Bird & Bird, who recently announced an uplift to £71,000 (a bump of 15%).

These improved pay packets are certainly good news for NQs but an article in the Financial Times suggests they could be causing tensions to rise at some firms.

The FT reports that anonymous senior associates at Slaughter and May and Clifford Chance are unhappy about uneven pay rises. One unnamed Slaughter and May associate is quoted as saying: “We are seeing real compression in pay. The headlines are all about the newly-qualified pay, but there’s been very little uplift for lawyers who are two, three, four and five-years qualified.”

Clients are also said to be unhappy about it. Linklaters managing partner Gideon Moore commented on Freshfields’ decision to increase NQ pay in May by saying: “Clients have been clear that they don’t want to pay for the increases.” “But,” he added, “like it or not you have to be seen to be competitive in that first wave of salaries.”

The autumn retention season has got off to a solid start with all five magic circle firms and some US firms announcing positive numbers. In the first part of our regular round-up, we look at the autumn retention rates revealed so far and the salaries NQs will be starting on.

All the magic circle firms have now released their autumn retention scores, with Freshfields and Slaughter and May sharing top honours.

Both firms are retaining 93% of their qualifying trainees, Freshfields keeping on 38 out of 41 qualifiers and Slaughter and May 37 out of 40.

Freshfields’s figures are an uplift on their spring 2019 score of 78% and last year’s autumn result of 83%. Their newly qualified solicitors will start on £100,000, as will Slaughter and May’s (although Freshfield’s newbies can earn a bonus on top of this salary, while Slaughter and May’s figure is said to include a discretionary bonus). This season’s results are another strong showing from Slaughter and May, whose scores in the previous three rounds have been 97%, 95% and 86%.

Linklaters was only a sliver behind the top two, keeping on 49 out of 54 qualifiers (91%). Their lawyers will also be on £100,000 per annum plus a discretionary performance bonus.

The last magic circle to announce this year was Allen & Overy whose 89% (39 from 44) edges the firm out of last place. Not to be outdone on the remuneration front, their NQs will earn “minimum total cash” of £100,000 in the form of salary and “a sign on bonus”. The firm received 43 applications and made 40 offers.

Meanwhile, Clifford Chance props up the table of magic circle firms. Their figures are hardly bad though as they will be keeping on a healthy 41 out of 47 (87%). Their NQs will earn “around £100,000”, assuming they receive their discretionary bonuses. This year’s results compared favourably to last autumn’s less impressive showing of 77%.

International firm Mayer Brown was first out the blocks once again, announcing their 82% score in early June. Nine of its 11 qualifiers will remain with the firm, with only one qualifier who applied for an NQ role being unsuccessful.

New York stalwart Shearman & Sterling posted similar figures for its London office, keeping on 13 of its 16 autumn qualifiers for a score of 81%. Twelve of these NQs will be based in London, with one joining the firm’s arbitration team in Abu Dhabi. They will start on a staggering £120,000.

Another New York-based firm, White & Case, has scored at impressive 89%, with 16 out of 18 staying with the firm. They will start their qualified careers on £105,000. In announcing the results, partner Inigo Esteve, who heads the firm’s trainee solicitor programme in London, had positive news for junior lawyers saying: “The business need for English law qualified lawyers continues to increase despite ongoing economic and political uncertainties, including Brexit.”

Elsewhere, Pinsent Masons is retaining 57 out of 72 trainees (79%) at a time when managing partner John Cleland has said the firm is “continuing the transformation of [its] business”. The firm’s London NQs will start on £72,500, compared to those in the regions and Scotland on £44,000 and £43,500 respectively.

This puts their NQs slightly behind those at Travers Smith’s, who will start on £85,000. The City firm is keeping on 17 out of 21 trainees for a score of 81%, a slight drop from its 90% this time last year and 94% the year before.

National firm Irwin Mitchell has announced an impressive 96% retention rate, with 45 of its qualifiers staying on. Of these, 15 will be based in London with the remainder spread between Birmingham (nine), Sheffield (seven), Manchester (five), Leeds (four), Newcastle and Southampton (two each) and Bristol (one).

Last and, unfortunately, least in this first autumn 2019 summary come international firm RPC with a disappointing retention rate of just 42%. Ten of the firm’s 12 autumn qualifiers applied for roles at the firm’s London office, but only five were successful. Partner Simon Hart explained the result by saying that the retention rate was lower than usual “largely due to applications into certain practice areas being significantly oversubscribed and us being unable to accommodate everybody with the number of roles available”. The firm expects better figures next year.

We’ll keep an eye on further announcements over the coming weeks and will reveal all in the second part of this blog.

The legal profession’s battle to get to grips with the new Solicitors Qualifying Exam (SQE) shows no sign of abating as we hurtle towards the September 2021 start date. As the key stakeholders try to work out how the new exam will affect them, one major concern is starting to emerge. This is, whether the new exam will lead to a two-tier profession? (For a recap on how SQE will work and its potential pitfalls, you can read our previous SQE blogs here, here and here.)

Let’s start by asking what we mean by a two-tier profession in relation to training.

According to Legal Cheek: “In the elite tier, the theory goes, you’d have City law firm trainees who have been put through expensive, extended SQE-LLM courses; then in second class there’d be the students who do the exam via a combination of cheaper preparatory courses and on-the-job learning.”

If this theory holds true, how will it fit with the SRA’s goals for the SQE? And how is the new exam likely to affect each of the three main stakeholder groups:

• Student lawyers

• Firms

• Training providers

Recap: The SRA’s goals for the SQE

The SRA’s stated aims for the SQE are to drive up standards, reduce costs for students and remove barriers to entry.

The SRA’s Julie Bannon, who is the architect of the new exam, has said the centrally assessed SQE exam will be harder to pass than the LPC and will improve standards. And, as SQE 2 will be taught on the job, this will reduce training costs and make access to the profession easier.

“There will be a wide range of courses available to students and this will impact cost. The cheapest option is likely to be a law degree with the integrated SQE and that will cost within the £9,000 fee cap which is cheaper than the LPC as it stands,” she says.

Students and junior lawyers

Not everyone agrees with Bannon. The Junior Lawyers Division (JLD) has been vociferous in raising its concerns about the exam.

Last week, the JLD wrote an open letter to the House of Commons Justice Committee requesting an enquiry into the decision to go ahead with the SQE. The letter says it believes the exam “will lead to a lowering of professional standards which will be detrimental to users of legal services and damage the reputation of the profession”.

Its specific concerns are:

• the removal of the requirement to study academic law and the fact that assessment will be by multiple choice;

• training requiring only “the opportunity” to develop the necessary competencies and sign-off being possible by a newly qualified solicitor who may not ever have met the trainee; and,

• the unresolved question of how much it will cost to qualify, (and whether loans will be available), and concerns about social mobility.

The JLD also wrote an open letter to the SRA last April, warning that the SQE could lead to the exploitation of student lawyers.

In the letter, the JLD focused on the decision to no longer regulate training contracts and training principals. This, it said, could result in junior lawyers being “exploited in unhealthy cultures, work and training environments”. It also claimed the abolition of a minimum trainee salary will be a barrier to entry to the profession for those from lower socio-economic backgrounds.

Law firms

Law firms face two significant challenges under the SQE. The first is whether their student lawyers should complete the two SQE exams consecutively (as they do now with the GDL or law degree, followed by the LPC) or separately.

Firms are said to be worried about the practicalities of releasing students to study for and sit the SQE2 exams. Questions arise such as when and how much time they would be given? And, what happens if they finish their work experience but fail SQE2?

The SRA recommends students complete SQE1, then do SQE2 after they have completed their qualifying work experience. It wants to avoid the financial gamble that can lead to students paying for and passing their LPC but not gaining the training contract they need to qualify. This has led to a bottleneck in the profession at the trainee stage. Critics say the new exam could result in that bottleneck simply moving to the qualification stage, with a glut of qualified lawyers unable to get jobs.

The second concern for firms is the content of the SQE. The new course lacks elective modules and the larger firms are concerned that their students won’t get the education they require. The result could be courses specifically designed for the bigger firms and it is here that fears of a two-tier system are most acute.

Even the SRA’s Bannon recognises the fact that the profession is likely to divide at this point: “I think we will see a range of different provision emerging,” she says. “At the very top-end there may be gold-plated courses designed for the particular needs of City law firms. These firms recruit up to two years in advance and provide funding so it’s up to them how best to prepare their future trainees.”

 “If you think about the sector as a whole, it may well be the case that different law firms have different requirements — it’s no longer one size fits all,” she says.

A similar split is probable during the work experience itself. Students at larger firms are likely to gain focused, hands-on experience designed to help them through SQE2, and get paid time off to study for it. Other, less fortunate, students may have to rely on gaining their two years’ experience by working for up to four firms on more of a paralegal basis, possibly at a low salary, and may need to take unpaid time off or work evenings and weekends to study for SQE2.

The training providers

The training providers come at the SQE from a commercial angle. Their interest is in providing courses that satisfy the SQEs minimum requirements and ones that go beyond these and meet the demands of the larger firms.

The University of Law’s director of business development, Morette Jackson anticipated this when she said: “It all starts with communication and making sure that all our entrants are aware that while doing the bare minimum of preparation courses and different bits of qualifying work experience will get you admitted, you may not be on a par with other candidates who have studied a more comprehensive and structured programme.”

Conclusion

It seems certain that post-SQE there will be a spectrum of qualifying standards in terms of both training and work experience.

This may or may not be a good thing, depending on your vested interest and where you are likely to sit on the spectrum. What is certain is that the SQE will be the subject of much debate in the months ahead. We will be keeping tabs on how the key stakeholders are preparing for the new qualifying process as we head towards the September 2021 start date, so watch this space.

Apart from one or two stragglers, most of the larger law firms have now released their spring retention scores. In this blog, we complete our seasonal NQ retention round up.

It may be a coincidence that the last two magic circle firms to announce their spring retentions have the lowest scores. Or it might not be. Either way, Freshfields’ 78% and Linklaters’ 80% trail behind the results of their magic circle rivals. Of these, Slaughter and May led the way with an almost flawless 97%, as you can read about in our first spring 2019 blog.

In fairness to Linklaters, it offers more training contracts than any other City firm (around 100 a year) and some fall-out is inevitable. Plus, 80% (41 out of 51) is a good score and consistent with its results of between 73% and 86% in the four most recent rounds.

Its NQs can earn up to £90,000 in their first year post qualification after taking into account performance-related bonuses. Linklaters’ trainee solicitor partner, Richard Hodgson, said he is “looking forward to seeing their careers progress as they embark on their roles as associates in a best in class and globally minded firm”.

Over in Fleet Street, Freshfields has retained 32 out of 41 trainees (78%). This is a slight dip on its score of 83% this time last year, but a marked improvement over the lowly 66% of two years ago. This spring’s newbies will start on £85,000 per annum.

Macfarlanes used news of its clean sweep of six from six to announce that it is offering future trainees £10,000 ‘financial support’ during their LPC. Plus, it will fund their LPC fees. This matches the recent financial uplift given to trainees-to-be by several other City firms, among them Herbert Smith Freehills, Hogan Lovells and Norton Rose Fulbright. The UK’s biggest financial supporter of student trainees is currently the London office of US-firm Sidley Austin, which pays £11,000.

Talking of Norton Rose Fulbright, it had an almost perfect 19 out of 20 result this spring (95%), with everyone who was offered an NQ role accepting. They will start on £77,000, level with DLA Piper and Baker & McKenzie. Baker & McKenzie itself announced a spring score of 71%, with 12 out of 17 trainees staying on.

International outfit Hogan Lovells has achieved an excellent 90% score with 26 out of 29 remaining with the firm. Most are going into the corporate team and all will be based in London. They will start on £78,000 per annum.

Reed Smith, meanwhile, is holding onto 11 of its 13 qualifiers (85%), one of whom is Dubai bound with the rest staying in London. No statement was made about their starting salary, but it is likely to pale beside that of White & Case’s 12 (out of 16) trainees who secured NQ positions with the firm.

They will begin life as an NQ on an eye-watering £105,000. London partner Melissa Butler said that the firm’s “combination of consistently high retention rates and a highly competitive salary and benefits package ensures that White & Case is a leading destination for talented, ambitious trainee lawyers”. Who are we to argue with that?

Overall, this is an impressive collection of results. It’s true that firms with poor results may be keen to avoid publicising them and so these are necessarily excluded from this round up.

Even so, the trend is that larger law firms are keeping on a high percentage of trainees this spring. Given that many of these retention decisions will have been made in the run up to the initial Brexit deadline of 29 March, this is encouraging news for trainees who are due to qualify in the autumn.

It is fair to say that the overwhelming response from the legal profession to the new Solicitors Qualifying Exam (SQE) has been confusion. Neither the firms nor the students (or for that matter the training providers) have a clear idea of how it will operate and what it will mean for the profession (as you can read about in our previous blogs here and here). As we head towards SQE lift-off in 2021, we ask whether there are signs that the fog is clearing?

At the end of last month, Legal Cheek published the first of what we expect will be several SQE surveys aiming to establish law firms’ attitudes toward the new exam. For anyone who has been reading the press surrounding SQE closely, the results won’t come as much of a surprise. In a nutshell, there is no consensus about how firms are going to change their training processes.

When are firms likely to take students on?

Let’s look first at when firms intend taking students on under the new rules.

Thirty-nine percent of firms said they would take on future trainees after completing the first part of the new exam and nine percent said they would do so before they had started SQE at all.

In the latter case, this would mean taking on graduates who had completed either non-law degrees or law degrees that did not cover SQE1 as part of their course. This seems surprising but indicates we may be moving to a qualification process similar to that for accountants where the firm puts the student through the whole process.

Meanwhile, almost a third of firms said they would only take on students after they had completed both parts of the new exam. If this becomes widespread it will go against one of the stated aims of SQE, which is to ensure students don’t waste time and money in passing the exams without any guarantee they will qualify as solicitors.

Twenty-two percent of respondents said they still hadn’t decided when they will take on students. It is possible that this figure under-represents the true position and we would conjecture that many firms polled did not respond to the survey as they still have no clue what they are going to do once SQE comes in.

Will firms provide training that goes beyond SQE?

Another survey question asked whether firms were considering additional training beyond that required by SQE. Sixty-three percent of firms said that they were. In addition, 41% of firms said they were thinking about developing their own SQE course, with 15% saying they might do so as part of a consortium.

These results give credence to our suggestion that we could be heading to a split between “trainees who have benefited from additional training in specialist areas (either in house or on an external course) and those who have simply completed the basic SQE1 and SQE2 requirements”. It is difficult to reconcile this with the SRAs goal of driving up standards and removing barriers to entry. Will we end up with the ‘haves’ who have received additional training beyond SQE (and are therefore more attractive to future employees) and the ‘have nots’, who have had the bare minimum training (making them less attractive)?

Is SQE going to be fit for purpose?

A bigger issue that this alludes to is the extent to which SQE is fit for purpose for the lawyers of the future. As we wrote about recently, AI and technology is changing the profession beyond recognition. This has led many to question whether law firms should rethink their traditional approach of recruiting certain types of students who have typically studied either law or a liberal arts degree.

Dani McCormick, director of solutions at LexisNexis, is quoted as saying that we should change the way we educate lawyers and believes firms must take the lead on this: “We need to teach things like service design and how tech could be applied to firms. In the future the job will be more than simply providing legal advice; it will be advising customers on how they can deploy technology in their legal solutions.”

Clifford Chance is one firm leading the way on this. Its Ignite scheme is taking on five trainees in 2021 and putting them through a programme focusing on legal technology.

In a similar vein, Manchester University has recently launched the UK’s first legal tech module, after developing it with input from law firms. Professor Claire Mcgourlay says of the course: “We aren’t equipping our students to go into the jobs that are becoming available. It’s not about expecting them to learn to code or to be computer science students, but to give them an awareness of what it is they are going to be facing.”

With this in mind, is there a danger that the SQE will be out of date even before it starts rolling out its first graduates?

In fairness to the SRA, it still has two years to get things right. Hopefully, by then the pea-souper around SQE will have lifted to reveal clear blue skies.

This is the first of our seasonal retention round ups as firms across the UK announce which of their trainees will be staying on as newly qualified solicitors. We tend to find that firms that reveal their scores early do so because they are keen to spread the good news, and this year is no exception.

It’s spring retention season and the early birds have already announced their latest retention scores. Earliest bird of all, as ever, was Mayer Brown, so let’s start with them. The firm posted its results before the Christmas trees were even up, revealing that all four trainees had accepted NQ positions starting in March. The firm’s full marks this round is an improvement on the eight out of 10 score it recorded last autumn.

First out of the blocks of the magic circle outfits was Slaughter and May, no doubt pleased to tell the world about its 97% score. Only one of its 35 March qualifiers is leaving the firm, a slight improvement on its already impressive 95% this time last year and 86% return last autumn.

Not shy of patting itself on the back, a spokesman commended the firm for keeping in line with previous years before adding that “we would like to congratulate all of our newly qualified associates”.

Slaughter and May is top dog so far of those magic circle firms to have announced, ahead of Clifford Chance’s 90% (46 out of 51) and Allen & Overy’s 83%. Clifford Chance has 51 trainees qualifying this spring, of which 46 will be staying on as NQs. This is an uplift from the Canary Wharf-based firm’s 77% last autumn and only a tiny dip from its 92% score in spring 2018. Clifford Chance takes the second most trainees each year, currently 95 to Linklaters’ 100.

Thirty-nine of Allen & Overy’s 47 qualifiers are staying with firm, giving it a score of 83%, which is in line with recent figures of 80%, 82% and 85%. Not stellar results, but consistent and highly acceptable nonetheless.

Linklaters and Freshfields have yet to announce and we await their results with interest.

Elsewhere, City firm Stephenson Harwood has proudly confirmed that all eight of this season’s qualifiers will continue their careers with the firm. Training partner Neil Noble was keen to emphasise that the firm continues “to place great importance on forming a strong pipeline of talent, as part of our ambitious growth strategy”.

Boston-based outfit Ropes & Gray is the first of the US firms to reveal its London spring retentions. The big news though isn’t that it is keeping on two of its three qualifiers (67%) but what that pair will be earning as NQs. They will start on a healthy £120,000, a rise of 4% that puts them in line with contemporaries at US competitors such as Davis Polk & Wardwell, Cleary Gottlieb Steen & Hamilton and Sidley Austin. The firm kept on all six of its qualifiers last autumn.

That’s it so far. We will post an update as and when the rest of the top firms release their figures. As always, we will be keeping a beady eye out for firms trying to hide poor results from media scrutiny.