Market Focus

In our first blog about the new Solicitors Qualifying Exam (SQE) we asked whether it will meet the SRA’s goals of driving up standards, reducing costs to students and creating a more diverse profession. In this blog, we look at the new ‘super-exam’ from the viewpoint of aspiring solicitors and ask five key questions to determine whether it represents a bright new dawn or is a disaster in the making.

No one knows yet exactly how the new SQE rules will play out as many of the details are still being resolved. This hasn’t deterred us though from answering five key questions of keen interest to would-be trainees. Some of what follows is speculation based on what we know so far, which we will be updating as more information emerges.

1. Is this the end of the training contract?

Well, yes and no. Technically, students need ‘work experience’ rather than a training contract and firms no longer need to be registered with the SRA as training providers.

There are four ways a student can gain working experience: as an apprentice or paralegal, at a student law clinic, through a sandwich placement or, yes you guessed it, through a training contract.

Given the law’s reputation for being slow-moving, one might expect that the good old training contact won’t be disappearing any time soon. However, we have heard that many large law firms are looking at ways of significantly reducing the cost of recruiting and training lawyers. Firms are said to be seriously considering taking on aspiring lawyers as apprentices or paralegals rather than trainee solicitors and cutting the salaries paid accordingly.

On the flip side, one could argue that the most prestigious law firms will use the promise of a traditional training contract (and commensurate salaries) as a way to attract the best trainees.

That will almost certainly not be the case for smaller or high street firms, many of whom may ditch formal training contracts entirely. We can see a situation where students will gain sufficient work experience at different practices to satisfy the two-year rule, at the end of which they will take SQE2 on a self-funded basis in order to qualify.

2. Will the SQE change when trainees are recruited?

We think it is likely that many law firms will decide to delay their recruitment until after an aspiring lawyer has completed SQE1. However, the timing of the recruitment process from a would-be trainee’s point of view may well depend on whether or not SQE1 forms part of their undergraduate law degree. While many universities will be keen to include SQE1 as part of their course, some may prefer to continue to teach from an academic point of view rather than a vocational one and not include it.

3. Will it cost students more to qualify or less?

There is still plenty of uncertainty over the combined cost of SQE1 and SQE2. However, we have heard that the estimated combined cost of £3,000 – £4,500 may be a little lower than the final outcome.

If one assumes that large commercial law firms will continue to offer traditional training contracts, (regardless of whether these aspiring lawyers are called apprentices, paralegals or trainee solicitors), then it doesn’t really matter to these trainees whether it costs more or less, as the law firms will continue to cover the cost.

What will matter to these trainees, is whether they are remunerated as well as trainees under the current system. And, whether they are asked to cover the cost of SQE1 if law firms, as we suspect, decide to delay their trainee recruitment until after this paper has been completed.

For those aspiring lawyers who would previously have needed to self-fund the LPC and will under the new system gain the required experience without the benefit of a ‘training contract’, then the process will almost certainly cost less than under the current system. (As things stand currently, students can pay upwards of £16,000 to undertake a year-long course without any guarantee of a training contract at the end.)

The greatest benefit to those looking to qualify without a formal training contract is that by splitting the exam into two parts we should avoid a situation where it is possible to pass the LPC and then fail to land a training contract. Having said that, students will need to consider the pass rates for both SQE1 and SQE2 and the cost of retaking the exams. What they won’t want to do is pass SQE1 and gain the necessary work experience, but then fall at the final hurdle by being unable to pass SQE2.

4. Will firms give trainees time off to prepare for SQE2?

As we have said, SQE2 is likely to be taken at the end of the two-year work experience. This is a major shift from the current system whereby trainees complete their exams before their training starts. It means in practice that trainees will either need to take time off from work to study or do so in their spare time. In this respect, the system will be similar to the way doctors and accountants do their final exams.

We see a giant red flag here. Will firms give trainees the time off they need? Or will trainees be expected to cram in studying and exams around what might for some already be a crushing workload?

5. Will SQE improve a trainee’s chances of landing an NQ role?

Some critics have suggested that SQE will shift the current training contract bottleneck to the point of qualification. The thinking is that firms currently limit the number of trainees they take on for two main reasons. First, because of the salary commitment; it has been estimated that it costs City law firms around £400,000 to train someone to NQ level. Second, because they know that at the end of the two years training contract they are expected to keep on as many trainees as possible. In other words, they keep an eye on their all-important retention rates as they know these influence their ability to attract the best candidates.

We can envisage a situation where firms take on a vast number of graduates onto their ‘training programme’ at paralegal-level salaries. Graduates will be happy to do this in order to satisfy the work experience requirement. Firms will then pick and choose their NQ solicitors from those who pass SQE2 at the end of the programme.

If this happens, larger commercial law firms may move to a situation closer to the way the big accountancy practices work. People may join as relatively poorly paid trainees, with a lower expectation of being kept on after qualifying. Concern over retention rates will be a thing of the past, which could lead to a glut of NQs seeking alternative employment every year.

Conclusion

Clearly, there is plenty of speculation at this stage about how SQE will operate and the SRA and its chosen exam assessor, Kaplan, are still working out all the details. As such it is too early to say where the SQE places on the ‘disaster’/‘bright new dawn’ scale. That said, as you can see from the above, there are a number of concerns and it would be helpful if the SRA would address these sooner rather than later as we edge closer to the introduction of the SQE in 2021.

We will update you with further news and additional thoughts in due course.

The introduction of the Solicitors Qualifying Exam (SQE) in 2021 will radically change how people enter the profession. The Law Society says the new two-part exam will drive up standards as well as reduce costs to students, remove barriers to entry and create a more diverse profession. Details of exactly how the SQE is going to work in practice are unclear at this stage but in this blog we’ve set out some thoughts on whether the new ‘super exam’ will meet its goals.

The SRA’s stated aims in introducing the SQE are to provide “a more reliable and rigorous test of competence than is possible at present” and “introduce transparency and competitive pressures to drive up standards and reduce cost”.

In order to achieve this, the qualifying process is being dramatically revamped.

How the SQE will work

Let’s start with a brief overview of what an aspiring solicitor will need to do in order to qualify once the SQE comes in (which is currently expected to be during the autumn of 2021):

1. Students will need to pass both stages of the SQE assessments, SQE1 and SQE2.

SQE1 is a test of legal knowledge and will comprise a series of written, mainly multiple-choice exams, and a written test of legal research and legal writing. It is expected that students will take SQE1 following completion of their university education unless it forms part of their law degree (which we think is likely to be the case in many instances).

SQE2 will test practical legal skills such as client interviewing and giving advice. It is anticipated students will take this exam towards the end of their ‘work experience’ (see below). This means firms will have to release their trainees to prepare for and sit the exam.

2. Students will need to have completed two years of work experience.

This can be completed with up to four employers and some of this can be acquired before a student sits SQE1. Experience gained as an apprentice or paralegal or during holiday work experience could count towards the required experience.

3. A degree or equivalent (in any subject).

4. Satisfaction of the SRA’s character and suitability requirements.

There is no requirement to complete a preparatory course before taking SQE1 and SQE2. In theory, someone could take both parts without going on a single course. They could also gain the necessary two-years’ work experience without undergoing a formal training contract, relying instead on a solicitor apprenticeship, placement work or work experience. Would this “drive up standards”?

The Junior Lawyers Division (JLD) has queried whether the fact that no preparatory course is required will make things harder not easier for some students. Chair Adele Edwin-Lamberton says: “We do not feel that just because the SRA has not specified that a preparatory course is mandatory, that this will prevent students (and firms) seeking a programme of study to assist them in passing the assessment, leaving those unable to afford a course at a disadvantage.” If she is correct, this clearly raises a diversity issue.

Another concern is the fact that not all universities will include SQE1 in their undergraduate law course, meaning some students will have to pay for and prepare for SQE1 after they leave university. Even if it is included, it raises a number of questions: when a university does include SQE1 in its degree course, who will pay for it? Will it be included in the cost of the degree or will it be extra? Will it be compulsory when a degree has it in the syllabus? We presume the answer to this last question is no, as many law students will want to qualify at the Bar rather than as a solicitor.

It has also been pointed out that because the preparatory courses are not mandatory, it will not be possible for students to obtain a professional studies or career development loan to cover the cost. This would seem to raise barriers to entry rather than remove them.

Also, although the SQE exams cover similar areas and topics to those under the current regime, unlike the GDL and LPC, SQE1 does not contain any electives. We believe many of the larger firms will want their trainees to have specialist knowledge of the areas they cover such as corporate finance, banking, etc. They will either have to provide this in house or require their trainees to have attended courses provided by external providers on additional subjects.

This could lead 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.

There are also concerns over the nature of the exams themselves, with Edwin-Lamberton expressing misgivings about the exam format saying she is “not persuaded that the use of multiple choice questions offers a rigorous means of assessment”.

There is little doubt though that the current LLB, GDL and LPC courses need more than a little refresh. Nigel Savage, a former head of the College of Law (now the University of Law), has criticised providers for “peddling versions of the GDL and LPC and very tired LLB programmes that are already 30 years out of date”.

In fairness, the providers themselves have largely welcomed the changes with Pearson Business School vice-principal Ben Hughes saying: “The aims of the SRA in shaking things up so dramatically should be applauded.”

What providers are less happy about is the shortage of information from the SRA about costs, the timing of assessments and the breadth and depth of practice areas.

With so much up in the air it is difficult at this stage to draw firm conclusions about whether the SRA will meet its goals. We will certainly be keeping a close eye on developments as more details become clear.

In the meantime, in our next blog we will attempt to answer some of the key questions being posed by both students and law firms about the new qualification process.

Every retention season is met with a frenzy of articles in the legal press setting out what percentage of each firm’s trainees are being kept on as NQ solicitors. The firms with the highest rates trumpet their success to show why candidates should choose to train with them rather than their competitors. The poor performers try to bury the bad news and hope no one notices. But are firms right to obsess over this or are they missing the point?

The battle for the brightest and best law graduates is relentless. That’s why law firms take such great pains to promote not just the quality of their training, but the fact that they aim to retain all of their trainee solicitors upon qualification.

This is perfectly noble and given the huge sums that law firms spend on taking an aspiring lawyer from graduation through to qualification, it makes sense.

However, achieving a 100% retention rate when you’re a law firm that recruits 20+ trainee solicitors a year is extremely rare. Large commercial law firms tend to achieve retention rates of between 70% – 90%.

When you consider that the length of time between the date upon which a training contract is offered to a final year law student and their date of qualification is often three and sometimes as much as four years, it’s hardly surprising that law firms struggle to achieve retention rates of 90% on a consistent basis.

For final seat trainees, retention season (usually March or September) is a nerve-wracking time. Will the department they are looking to join have an NQ vacancy? How many other trainees might apply for that role? Did they impress the head of department when training in that seat? Was that too long ago? So many questions, so much uncertainty. Solicitors don’t like uncertainty!

If you don’t like uncertainty (and as a lawyer we’re guessing you may be on the risk-averse side of things), are you better off securing a training contract with a smaller law firm? Is there a correlation between the number of trainees a firm takes on and their retention rates?

For those who would prefer to avoid the anxiety leading up to qualification, we are sorry to report that there is no correlation at all.

We looked at the retention rates of a sample group of 26 top 100 UK and US law firms during 2016, 2017 and 2018 and found that:

• Firms that took on 1 – 20 trainee solicitors a year retained 81% on average
• Firms that took on 21 – 50 trainee solicitors a year retained 84% on average
• Firms that took on 51+ trainee solicitors a year retained 83% on average

We then examined whether there was a difference between the retention rates achieved by the UK and US law firms in the same sample group and again found no real distinction: the UK firms retained 83% on average and the US firm retained 85%.

This doesn’t offer much guidance to trainees. But do they need it? Are firms right to focus so much on their retention rates as a means of attracting the best students?

We don’t think so. Whether or not they’re going to be retained as NQ solicitors is clearly important to aspiring lawyers, but it’s not quite as important as firms might think.

In the trainee and NQ survey we carried out earlier in the year, we asked participants: “What was more important to you: staying with your training firm as an NQ solicitor or qualifying into your preferred practice area?”

Only 5.3% said staying with the firm was more important, 22.2% gave them equal importance and an overwhelming 72.5% said qualifying into their preferred practice area was more important.

The message from trainees is that cast-iron certainty of a job with their training firm is not top of their list. What they want is good training, to be paid well and to pursue their career in their chosen practice area.

There’s nothing wrong with having a 70% retention rate if the 30% feel like they have been well looked after, have received good training and have gone onto secure an NQ role, whether in house or in another law firm, practising the area of law they enjoy.

The new Solicitors Qualifying Exam (SQE) being introduced in 2021 is going to change how people enter the profession and the traditional training contract will no longer be a prerequisite to qualifying as a solicitor.

The impact of this is something we are going to write about in a future blog, but we believe it may have a dramatic effect on the way firms recruit and train junior staff. It is quite possible we will end up with a similar system to the accountancy profession where firms take on large numbers of student lawyers with little or no expectation (from either the students or the firm) that they will be kept on after qualification. If that is the case, retention rates will be a thing of the past.

In the meantime, most trainees qualifying in spring 2019 will be nervously wondering what the future holds for them and where their future lies.

It was a mixed bag for the magic circle and top US law firms as the final autumn retention rates were announced.

Linklaters was the last of the magic circle firms to announce its autumn 2018 retentions and it was a case of last and least – its 73% score was lower than all of its magic circle rivals. The Silk Street giant is retaining 43 of its 59 qualifiers, although it should be pointed out that it takes on more trainees than any other firm in the City. This is a dip from its recent excellent returns of 84%, 84% and 86% in the last three rounds. NQs will start on around £90,000 (depending on bonus). Graduate recruitment partner Richard Hodgson seemed happy enough though, commenting: “We are pleased to once again retain a good number of quality lawyers … I look forward to seeing their careers progress as they pursue exciting opportunities within a best in class and globally minded firm.”

Freshfields scored 83% (34 out of 41) to put it in the middle of the magic circle pack, slightly ahead of Allen & Overy’s 37 out of 46 (80%). Freshfields’ new NQ solicitors will be on £85,000 per annum. In our earlier autumn retention rate blog, we reported Slaughter and May’s excellent 86% (32 from 37) and Clifford Chance’s less stellar 77% (36 from 47). A mixed bag then for those at the proverbial top of the legal tree.

Looking now at the silver circle, Macfarlanes has notched a more than acceptable 91%, with 21 out of 23 moving up to NQ status. Meanwhile, Bryan Cave Leighton Paisner has a retention rate of 79% (15 out of 19), which is not outstanding, but is a marked improvement on its spring number of 64%. All but two will be based in London, with one of the new cohorts qualifying into the firm’s Hong Kong real estate team and another into its Frankfurt finance team.

Herbert Smith Freehills has achieved a creditable 82%, with 31 out of 38 staying put. This trails behind Ashurst’s outstanding 90%, with all but two of its 21 qualifiers securing positions as NQ solicitors. The firm’s training principal, Sarah Sivyour, said the results “reinforce the firm’s commitment to attracting, supporting and developing the best people from the widest talent pool.” Good as its results were, Ashurst failed to match the performance of fellow silver circle firm Travers Smith, who achieved a perfect 21 out of 21 as we reported in our early autumn blog.

Elsewhere, Norton Rose Fulbright offered 28 out 31 trainee solicitors NQ positions this autumn, all of whom accepted (a score of 90%). This is a welcome (and impressive) hike from its unspectacular spring showing of 62%. Stephenson Harwoodmatched this 90%, albeit from a lower number, with nine of its trainees staying with the firm. All will be based in London apart from one NQ solicitor who will join the firm’s Shanghai office.

Other firms to have announced their autumn results include CMS, who had 72 trainees qualifying this autumn. Of these, 55 will continue with the firm, 36 of whom will be based in London, six in Edinburgh, six in Sheffield, three in Aberdeen and two each in Glasgow and Bristol. The London-based NQs will start on £70,000 compared to their counterparts in Bristol, who will be on £50,000 and those in Scotland on £40,000. The firm’s Manchester NQs will earn £42,000 and those in Sheffield, £41,000.

Other high performers were RPC, who are keeping 14 of 17 (82%), Fieldfisher, 11 out of 13 (85%), and Clyde & Co, 38 out of 46 (83%). Of these, 30 of Clyde & Co’s newbies will be based in London with the rest spread between Manchester, Guildford, Newcastle, Hong Kong, San Francisco and Singapore. Charles Russell Speechlys, meanwhile, topped all these excellent scores with an even better one of its own – 88% (23 out of 26).

Of the late announcing US firms, Reed Smith is keeping on 10 out of 13 of its London-qualifying trainees (77%), a drop from its 86% this time last year. They will start on £75,000 per annum. Over at White & Case, 21 of its 25 qualifiers are staying put (84%), all of whom will start at a not-to-be-sniffed-at £105,000. This ranks them alongside US rivals Shearman & Sterling and £3,500 ahead of their counterparts at Sullivan & Cromwell.

With the autumn NQ retention announcement season in full swing, we take a look at which firms are coming out on top so far.

US mega-firm Kirkland & Ellis has achieved a perfect score for autumn 2018 with all 10 of its London-based trainees remaining with the firm. This compared favourably to its poor showing a year ago when just five out of nine stayed on. They will start on an eye-watering £146,000, in part thanks to the salary war being waged by US firms, as we wrote about here.

Trailing behind the US giant is Clifford Chance, the first of the magic circle firms to reveal its autumn 2018 retention rates. And pretty underwhelming they are too. Out of 47 qualifies, 44 applied for roles at the firm with 36 succeeding (a retention rate of 76.5%). This is a drop from its 92% score in the spring and below its 81% average score over all retention periods from spring 2010 to date.

There’s better news at fellow magic circle firm Slaughter and May, which has posted an 86% retention rate (32 out of 37 qualifiers). This is down on its spring return of 95% and its score of 91% this time last year.

Also lagging behind Kirkland & Ellis is US firm, Shearman & Sterling, which is keeping on 11 of its 13 qualifiers (85%). Nine of these NQ’s will stay in London, with one moving to its office in Brussels and the other to its office in Abu Dhabi.

Silver circle firm Travers Smith is another to have gained full marks, keeping on all 21 of its autumn qualifiers. They will start on £75,000, ranking them alongside Baker McKenzie, DLA Piper and Hogan Lovells in the salary stakes. The firm has a strong record on retentions with a 90% score in the spring and 94% this time last year.

Fellow City outfit Taylor Wessing has announced a more than creditable 91% retention rate, offering 21 out of 23 trainees an NQ role, all of whom accepted (although one is on a fixed term contract). They will start on £71,000, a hike of £8,000 compared to last year.

Mayer Brown was first off the mark with its announcement this summer, keeping eight out of 10 NQs (an easy to calculate 80%). The firm kept all four of its spring qualifiers.

Outside the capital, special mention must go to Bristol-based Burges Salmon which has scored an impressive 96%, with all but one of its 27 qualifiers accepting offers to stay with the firm.

We’ll be keeping a close eye on further announcements, so look out for our update later in the summer.

In the first part of this two-part blog, we looked at the salary war currently being fought by the large US firms in their bid to attract the best talent.

In this second part, we examine what forward-thinking firms can do to persuade NQs and associates that it is not all about the money.

How important is salary when recruiting the best NQs and associate lawyers? If the recent pay battle between the top US firms is anything to go by, many law firms think it is the number one factor in attracting the top talent.

But how true is this? Deloitte’s recently published Global Human Capital Trends Survey suggests that in the UK at least, other dynamics are at play which may be as or even more important.

Deloitte’s survey highlights the UK’s top three ‘human capital’ trends in 2018. We look at these and examine the extent to which law firms should consider these when recruiting the brightest and the best.

1. From careers to experiences

“In the 21^st century, the individual and his or her experience take centre stage,” say Deloitte. This means that rather than a steady progression along a fixed pathway – think of lawyers climbing the associate ladder to partnership – individuals are seeking a job that allows them to acquire valuable experiences and to continually reinvent themselves.

This has resulted in a shift in the power balance between employers and employees. ‘Millennials’ now make up nearly 50% of the workforce in many organisations and they want to work on their own terms. This includes flexibility (driven by technology) in terms of how, where, when and with whom they work. People are more willing to work part-time and manage a portfolio career around their own interests.

At present, only 20% of organisations focus on providing their staff with meaningful experiences. Deloitte believes that the remainder need to fundamentally re-evaluate their approach to careers. This includes “building flexible career opportunities that focus on skills and tasks rather than just jobs”. They should also assess new talent pools and think beyond full-time salaried employees to flexible workers. Deloitte says more change is coming and that “agility is key” in order to react to society’s shifting demands.

How many law firms are within the enlightened 20% and have even thought about these issues? Given their willingness to throw money around as if it is the only thing that matters, the answer is probably ‘very few’.

2. Wellbeing: a strategy and a responsibility

The line between work and life is blurring like never before (and not just because many associates seem to live in the office). Today’s employees demand a range of benefits that covers their physical, mental, financial and spiritual health. This includes the physical working environment itself, which is one reason so many corporates are now attracted to the ‘WeWork’ style of office set-up.

Wellbeing is defined in this context as “feeling good and functioning well”. As Deloitte says: “Employee wellbeing is no longer seen as ‘nice to have’ but an essential differentiator.” It is strongly associated with improved rates of retention and engagement, not to mention productivity.

How many law firms take this seriously rather than paying lip service to it? At the end of last year, Legal Cheek surveyed 2,000 trainee and junior lawyers about how many hours they worked a week. Many average 11+ hours per day, rising to above 12 hours a day in some cases. One magic circle lawyer is quoted as saying: “I go home just to sleep, I am in the office for every other minute of the day. That being said, I have only had to work two weekends over the past four months, which has been nice.”

How sustainable is it to expect junior lawyers to suffer this work/life balance at a time when society is starting to dance to a different beat?

3. The hyper-connected workplace

Technology has changed how we communicate. “The adoption of innovative workplace technologies is now being led by employees rather than the employer,” say Deloitte. “Individuals are taking popular social and collaborative tools from their personal life and applying them in the workplace.” It asks if organisations can use hyper-connectivity to become hyper-productive?

Could well thought out technological architecture improve law firm efficiency and employee productivity? Are lawyers at risk of being stuck in age-old working methods at the expense of both their clients and employees?

One firm that is taking this seriously is Mishcon de Reya. It announced recently that it is offering some of its lawyers the opportunity to take 20% of their chargeable time to help develop innovation and technology initiatives. Its chief technology officer Nick West said: “We are constantly looking for ways in which we can deliver more for our clients through optimising technology and ways in which we can streamline our own ways of working.”

This is exactly the type of step firms unwilling or unable to match the stratospheric salaries being offered by US and magic circle firms should be taking as the battle for talent intensifies.