pro-legal market commentary and salary guide 2015/16

Last year was the most eventful year many of us can remember for the UK’s legal profession. After many firms saw a bit of a false start in the spring and a retrenchment through the summer, the autumn saw recruitment activity explode into life and activity levels continued to increase through to Christmas. In this commentary, we will try to make sense of 2014, give some insight into what we can expect in 2015 and what that means for legal careers.

Conor Dilworth

Managing DirectorPro-Legal

Pro-Legal Recruitment Specialists | 2015/16

ContentsMeet the teamIntroductionSpecialismsGeographicalCandidate motivation trendsClient hiring process trendsPrivate Practice salary insightIn House Counsel salary insightWho we work with2015: The odyssey continues ...

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Meet the team

MANISHA VEGADConsultantManisha joined Pro-Legal in 2013 after graduating with a First Class degree in Commercial Law. She recruits for a variety of US and UK law firms recruiting at all levels from Newly Qualified to Partner level across all disciplines. Manisha has successfully completed a number of retained and contingent assignments and she has a particular expertise in recruiting Intellectual Property specialists both in the UK and overseas.

020 7269 6319 [email protected]

CONOR DILWORTHManaging DirectorConor is one of the founding Directors of the Pro-Recruitment Group and he heads up Pro-Legal. With over 10 years’ experience in Legal Recruitment, Conor has a very strong network of contacts and track record for recruitment within Private Practice, Commerce & Industry and Financial Services. Conor works closely with clients of all sizes from boutique to Global Top 10/FTSE 100 and is mainly focused on recruitment at Partner, Lead General Counsel and team moves.


ALEX RUSSELLManager Alex manages the recruitment of legal professionals into the leading City firms. Alex has exceptional relationships with several Partners at Magic Circle, Silver Circle and UK Top 20 firms. Together with his team, Alex works on providing the best law firms in the world with high end talent across all areas of law. Alex spent 7 years as a Commercial Litigation Solicitor with a leading UK firm prior to moving into recruitment, joining Pro-Legal in 2011.


MARK KIRKConsultantMark joined Pro-Legal in 2014, having spent three years’ with a leading legal recruitment company. He specialises in recruiting lawyers at all levels throughout the UK, Middle East and Asia. Mark specialises in Private Practice recruitment, working with a diverse range of clients including City and regional firms, UK Top 50 and leading US firms. Mark is particularly well networked within Real Estate and EU & Competition. 020 7269 6313 [email protected]

RUPA DASAssociate ConsultantRupa specialises in recruiting for Private Practice clients across every specialism, working with lawyers from Newly Qualified to Partner level. Rupa joined Pro-Legal in 2014 after graduating with a Physics degree from Kings College London. Rupa focuses on Junior and Mid Level Associate roles for Magic Circle, UK Top 50, US firms and boutiques. Rupa recruits for contentious and non-contentious business law roles.


4 Pro-Legal Recruitment Specialists | 2015/16

Introduction

2014’s maelstrom of mergers, prepacked insolvencies, ABSs, MDPs, unbundling, bundling, rebundling, direct access, rebrandings, off shoring, near shoring, on shoring, commoditisation, and consolidation has been exhausting to watch from the side lines. It is no wonder that 2014 saw a staggering number of Managing Partner departures. Who would want the top job against this baffling backdrop? To paraphrase Sir Alex Ferguson, “The Legal Market? Bloody Hell!”

The two key catalysts for all of this activity are the economic recovery and the ABS revolution starting to gather pace. Rules around law firm ownership have indemnified the legal market against certain market forces for a long time. The legal market has years’ worth of modernisation to catch up on. In some areas this is happening at a considerable pace as the competition for the provision of legal services really heats up. So how does a lawyer differentiate between the various new structures that have developed and choose the right career path in this rapidly changing landscape?

UnbundlingMany firms have taken significant steps to improve value for money to clients. The mapping and commoditisation of legal process has reaped huge benefits for some firms. The lower risk and lower complexity parts of the process are delegated to paralegals resulting in huge cost savings for both firm and client. When this is combined with opening up offices in lower cost locations (see the table below) firms have been able to drive costs down further.

This has created greater competition for talent in these legal hubs thus pushing salaries up. London is still the driver for work generation but a lot of the salary benefit is spread to these regional hubs. For example, in certain specialisms, Bristol has overtaken London in terms of competition for talent.

Bundling UpPerhaps the most significant threat to law firms (particularly the national firms) is the bundling up of legal services with other advisory services in the transaction cycle. The organisations who provide this threat are the Big 4 Accounting firms, 3 of whom now have ABS licences and are actively developing their legal services offering. The holistic offering is highly attractive to clients and offers efficiency and cost effectiveness. This has increased competition for talent but as yet the newer players are not changing the salary landscape although the working hours culture and benefits are more agreeable at the Big 4. Whilst they’re not starting a salary war, they are providing an attractive employment proposition and therefore are attracting good quality candidates.

RebundlingRebundling is the term that has been applied to firms with a strong historical track record in highly commoditised areas (personal injury is the most common example) who are now using their structure to offer higher end legal services with better margins. This is done through the poaching of rainmaker commercial law partners and then plugging them into a highly evolved work flow processes and large paralegal functions. The target end result is streamlined, cost effective and high calibre legal advice. Many of the organisations who have gone down this path already have a corporate style management structure, further adding to their efficiency and ability to change to market demands. These organisations are increasingly visible in big ticket commercial law areas.

“Anyone who’s not confused doesn’t really understand the situation”

Belfast Allen & Overy, Herbert SmithBristol CMS, Simmons & SimmonsGlasgow AshurstManchester BLP, Clyde & Co., FreshfieldsMilton Keynes Dentons

Top 20 firms with new or expanding lower cost bases around the UK:

www.pro-legal.co.uk 5

Specialisms

Red Hot - Corporate, Real Estate and Banking & Finance

Corporate, Real Estate and Banking & Finance are the three areas that are going to be red hot for recruitment in 2015. It is safe to say that corporate experienced a much needed resurgence in the second half of 2014 and optimism is almost universally high that client demand will remain strong throughout 2015. Real Estate also enjoyed a strong demand through the second half of 2014. Banking & Finance disciplines performed well and are also expected to stay in demand throughout 2015. Demand in all of these areas is strongest at the 2-5 PQE level, in the last 3 months of 2014 there were 7 times as many vacancies on the market as there were active candidates. The situation at the mid-level is going to get worse before it gets better. The perfect storm of: increased competition from new ABS players; an upsurge in client demand; the low number of qualifiers between 2009 and 2012 and; significant demand from in-house counsel teams, means the demand is rising far faster than supply.

Corporate, Real Estate and Banking & Finance all saw a significant increase in the level of vacancies at NQ-2PQE and Senior Associate coming on to the market. Both the junior and the senior associate level are less pinched but still have a degree of competition for talent. Senior Associates should bear in mind that Partner promotions are still driven by succession rather than expansion in most cases.

Demand in all of these areas is strongest at the 2-5 PQE level ”“

Hot - Technology, IP, Banking Litigation, FS Regulatory and Private Client

2015 promises to be strong for all areas of Intellectual Property. The commercial IP disciplines are forecast to perform particularly strongly. As with areas of law that are evolving quickly, partners seem more amenable to staffing their teams with more recent qualifiers alleviating the pressures on the mid-level (although mid-level lawyers in this area are still hugely in demand).

In Financial Service Regulatory, we have seen several firms significantly increase their capability and the indicators are that this will continue to be area of notable demand throughout 2015. The volume of vacancies in banking litigation remained steady throughout 2014 and we generally see this as an area that is short on specialists and therefore will continue to have strong demand throughout 2015.

These are interesting times for Private Client professionals. The ABS rules have seen the rise of several multidisciplinary partnerships (MDPs) offering a mix of legal accounting and wealth management services and it is these organisations that are seeing the fastest growth. There are a huge number of opportunities available in this area at all levels. These holistic offerings make for a compelling sales pitch. Private Client as a bolt on service is on its last legs at most corporate or full service firms.

How have the various areas faired and what is the outlook for 2015?

Specialisms


Warm

Areas such as Tax, Employment and Pensions that rely to an extent on deal flow were still a little weak in 2014. However, we anticipate that these areas will experience a significant jump in vacancy activity in the first three months of 2015. We are already seeing a level of demand for February and March qualifiers in these areas that we haven’t seen for seven or eight years. Some firms are even reporting that they anticipate having more vacancies for NQs in Tax, Employment or Pensions than they will have internal applicants.

Cooler

Commercial Litigation was quiet throughout 2014 and we envisage no significant change in the first half of 2015 in terms of external recruitment activity. Although teams are reporting being busier, there is a well-established tendency to recruit from within the firm’s own trainee pool to maintain critical mass in Commercial Litigation. Until Commercial Litigation experiences a more significant upturn in market activity we do not feel there will be any marked change in recruitment activity. This is in stark contrast to more specialised litigation areas such as Insurance, Intellectual Property and Banking where demand for external hires has significantly increased when compared with previous years.


GeographicalIn pure vacancy number terms, London is still the most fertile market for legal recruitment in the UK. However relative to current resident lawyer headcount, Bristol, Birmingham and Manchester are all seeing similarly fierce levels of competition to the Capital.

We predict a strong 2015 for other major legal hubs including Leeds, Cambridge, Oxford, the Thames Valley, Nottingham and Southampton. Several national firms with offices in these locations have expressed a preference for servicing big-ticket work from these locations over London due to the cost savings.

There is still a degree of post referendum paralysis in Scotland. It is noticeable that the traditionally strong markets of Glasgow, Aberdeen and Edinburgh haven’t enjoyed the resurgence that the rest of the UK has. We predict that Scotland will enjoy a better second half of 2015 than the first. The UK general election is likely to provide further clarity on the level of devolution in Scotland and this should serve as a stabilising influence on the legal market.

Bristol, Birmingham and Manchester are all seeing similarly fierce levels of competition to the Capital ”

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Candidate motivation trends 2015 is seen by many legal professionals as a crucial year in their career. 91% of those surveyed felt more optimistic about their career prospects now than they did in January 2014. A significant number of the U.K.’s lawyers (57%) are considering a change of employer at some point in 2015. For the Associate level, the most common motivational factor in these moves is to enhance progression prospects, with 61% of those surveyed identifying this as a key driver of any potential move. Other common motivators include poor firm morale, feeling undervalued by firm management and an opaque evaluation and bonus system at their current firm.

Compared to other markets the legal market has a very low instance of people moving for a significant salary increase. Whilst all firms must remain competitive in a salary structures to attract suitable calibre individuals, the number of people who are looking make moves primarily for reasons of reward are very low (4%). It is also worth noting that the majority of these are candidates are currently paid less than the market rate by at least 15% for the type of work they do at the type of firm they are in. We are seeing a shift towards a more lucrative bonus system at certain firms being highly attractive to potential employees, provided the criteria for bonuses are transparent, meritocratic and straight forward. These enhanced bonus driven reward structures have divided opinion amongstjob seeking associates; some see them as an opportunity to excel and be rewarded for it, others see it as a way for partners to get more money

Many junior associates prize the stature of the firm and thus the perceived quality of the work above many other factors however when talking to candidates four or more years qualified as directory rankings diminish in significance. ”

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into their own pockets by keeping their wage bill down. As with many strategies around incentive and reward, it is in the implementation that the real objectives of the change become apparent. There were three notable occasions in 2014 when we saw significant spikes in candidate flow from particular firms (two were UK Top 30 firms and one was a large US firm) with the common complaint being that promises around reward had been broken.

When identifying what they are looking for in a role many junior associates prize the stature of the firm and thus the perceived quality of the work above many other factors. Frequently a firm’s position in the legal directories is highly significant as at a junior level there is little else in the way of tangible comparisons. We see a significant shift however when talking to candidates four or more years qualified as directory rankings diminish in significance. This would logically be attributed to the individual’s own experience providing a better barometer than the legal directories.


Client hiring process trends‘Technical ability’ is the leading attribute that partners at law firms look for. On the in house side, ‘Commercial Awareness’ (closely followed by ‘Team Fit’) is the most important quality that General Counsels look to assess on interview.

The hiring process at many organisations is evolving. Many law firms tend to have a two stage interview process with the first interview being more exploratory and the second being more technical. Whilst this method is good for evaluating experience and technical knowledge, it does little to identify an individual’s potential or behavioural competencies. This method can also be misleading with regard to team fit as two one hour interview processes are not an adequate platform for a thorough personality evaluation. As the market continues to improve, the challenge for law firms is how to identify the individuals who don’t necessarily have the ideal experience and technical knowledge but those who have the

potential to pick it up in a short space of time and/or those with transferable skills. The challenge for candidates looking to fill these roles is finding the best way to convince a potential employer to hire you on the basis of your potential.

General Counsels have a slightly different challenge. The average length of tenure in house is significantly shorter than in practice (2.4 years in house versus 3.8 years in practice) so do you want to invest in a model that is built to retain by making sure that you are maximising the variety and progression in their roles? Or do you want to build in a level of turnover into your annual plan for your business unit?


Salary insight

Scotland

PQE Mid-tier & national

Small & medium firms

NQ £29-33k £24-30k

1-3 PQE £30-39k £25-35k4-6 PQE £37-60k £32-48k7 years + £51-75k £39-60k

North West



NQ £31-36k £26-31k


South West



NQ £31-43k £20-30k


North East



NQ £28-32k £24-30k


Midlands



NQ £30-34k £28-30k

1-3 PQE £34-46k £26-42k4-6 PQE £40-60k £34-52k7 years + £52-79k £44 - 66k

LondonPQE City Niche/

boutiqueNational US/

transatlanticNQ £55-66k £42-54k £55-62k £68-105k

1-3 PQE £62-94k £45-71k £63-78k £78-135k4-6 PQE £80-130k £64-80k £70-88k £99-168k7 years + £90-160k £70-80k £68-95k £118-200k+

Private Practice salaries

Home Counties



NQ £30-36k £25-29k



Salary insight

PQE Min Max0-3 years £50k £68k

4-6 years £64k £90kSenior Counsel £88k £125kHead of legal/Lead General Counsel £110k £300k










4-6 years £65k £85kSenior Counsel 805k £135kHead of legal/Lead General Counsel £100k £220k









In House Counsel salaries

Manufacturing

Energy

Pharmaceutical

Business Services

Charities and Not For Profit

Property and Construction

Retail FMCG

IT Telecoms

Media

Financial Services

(Regional weighting applies)


Who we work withHere are some of the organisations who trust us to deliver on their recruitment needs.

2015 The Odyssey continues…


With ongoing uncertainty in the EU, a general election in the UK, a cooling of certain emerging global markets, increased activity in other emerging markets, and warnings about the UK’s national debt, it would be difficult to predict anything for 2015 with any great certainty. However all of these events are likely to generate work for the U.K.’s legal profession so even a bleak outlook could be construed as rosy.

There are the structural problems with the staff pyramid at several firms. The move away from a PQE graded salary and hierarchy is starting to take shape at many firms but needs to accelerate. According to the law society, there are 18,000 commercial lawyers aged 26 to 30 and 25,000 aged 31 to 35. This age demographic is incompatible for any pyramid in which post qualified experience is a significant factor in denoting seniority. Accountancy firms ditched PQE in favour of a three or four tier grading system for qualified staff more than 20 years ago and law firms may need to do likewise. Partner and senior associate levels are still bloated but more junior lawyers are too thin on the ground. A rebalancing or rethinking is necessary to address this top heaviness. The up or out model only really works if your firm can take a consistent number of partner promotions each year and has a large pool of trainees of which sufficient numbers are retained each year (which the vast majority of firms can’t at present and are unlikely to be able to for the foreseeable future). The quickest and easiest fix for this is hiring more experienced candidates than you had envisaged needing. Many candidates will be flexible on salary and not everyone wishing to continue a career in private practice has designs on partnership. The other options are a) identifying transferable skills from other areas of law that aren’t in such great demand and taking the high calibre lawyers who are

looking to change specialism and b) identifying the personality, intellectual and behavioural traits that will best enable an individual to excel in your area of law; hiring on potential. This is a bold step and will take a significant shift in culture at many firms but the benefits for all parties are evident at the firms that have already moved towards this.

There is a huge opportunity for the firms and lawyers willing to take it in 2015 and fortune has a habit of favouring the brave.

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pro-legal market commentary and salary guide 2015/16

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