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Over recent years, newly qualified (NQ) solicitor salaries have risen significantly, especially at City law firms. There appears to be an ongoing salary war with many firms competing to be at the top. Nick Robbins, founder and director of Nicholas Scott Global Legal Recruitment, believes that firms are “using pay to make a statement about their position in the market”.

Despite reasonable efforts, UK law firms don't appear to be able to compete at the same level as US-headquartered firms – with US firms offering much larger NQ salaries of around £120,000 to £175,000. Akin Gump Strauss Hauer & Feld, headquartered in Washington DC, offers a salary of £164,000 to freshly-trained solicitors – an astounding figure. City law firms can’t quite keep up with such large figures but are still offering NQ salaries of £70,000 to £107,000, with firms such as Linklaters LLP and Allen & Overy LLP offering the higher end of that.

An article by The Lawyer mentioned that these recent salary hikes have meant that City firms' NQ pay is sometimes higher than that of some regional partners – which could raise some mixed opinions.

Why are firms raising their NQ salaries?

Competition

As one firm raises their NQ salary, it doesn’t take long for others to follow suit – as none want to be trailing behind in the very competitive corporate-legal world. City firms and US-headquartered firms are competing to see who can offer the highest NQ salaries, to attract more trainees to join their firms. However, this competition isn't necessarily healthy and hiking salaries isn't a sustainable option for firms.

The rising cost of living and inflation

There are main reasons why employees are seeking higher salaries – rising inflation and the cost-of-living crisis. Everything is becoming more expensive – rent, energy bills, food – but people are expected to work at their job on the same salary. Some can’t financially survive on their current salaries, forcing them to seek employment at a business that offers them a higher salary. Commercial law firms understand the state of the market, so they understand that people will be seeking these higher salaries. Employees are now in a position of power, and law firms are there to listen. This is why we’re seeing City firms offering NQ salaries in the £100,000 region. 

What are the types of law firm partnership? Find out with this Feature.

Retention 

Law firms focus on retention rates, with many priding themselves on their high retention rates after trainees complete their training contracts. By promising trainees a big salary of £100,000 or more, I’d say that's a very big incentive to stay on board at that firm – the guarantee of a large salary after you’ve completed your training. However, with many firms following the way and offering the same or better salaries, trainees could be swayed to leave their firm for a slightly higher salary elsewhere.

Are there alternative strategies?

If firms can’t hike up salaries, like many others, then they should focus on other strategies to retain or onboard employees. Thinking of other strategies would also be beneficial for all the law firms as raising salaries is not a sustainable business option, as there will need to be a limit at some point.

There are other factors that would encourage and retain employees, including having a friendly and open culture; having lower or no billable targets (like Slaughter and May) to reduce pressure and competition amongst employees; or offering flexible working options. Since the covid-19 pandemic hit, businesses shifted to working-from-home to enable work to carry on throughout lockdowns. Post-lockdowns, businesses have tried to move employees back into the office, but still offer work from home or hybrid options. If law firms offer more of a hybrid option, this might encourage people who have children, who care for others, or who have responsibilities outside of work too. By being adaptable to the different situations of others, employees may feel comfortable at a firm that offers such flexible working models.

Another strategy that could be used is the one that law firms used back in the 1960s, where solicitors could become partners upon qualification. So, firms could offer equity to NQ solicitors as an alternative to hiking up NQ salaries, giving them a share of the business. However, this option may not be suited to all firms and their employees. 

What's going to happen?

In my view, the hike in NQ salaries is going to stop soon. Firms have hiked up salaries for multiple reasons – competition, inflation, the cost-of-living crisis, and meeting the demand of employees. However, with firms like Akin Gump, who have raised NQ salaries up to £164k, there will eventually be a limit. It's not a sustainable business model to continually raise salaries in order to satisfy employees. There are alternative options to encourage and retain employees – such as having a friendly and open culture, offering flexible working options, or having lower billable targets. All of these will create a more relaxed working environment, which employees highly value in the long term.

The NQ salary war is not sustainable, and it will come to an end.

Read this Blog post by Neide Lamos next: 'Staying competitive: identifying competitors for a successful application'.