Just how much is a young lawyer worth?

Starting out at one of London’s leading commercial law firms, everyone knows that the working life of young lawyers is hard: long hours are par for the course. Walk through the City at 10pm at night and you can see some of them ensconced in steel and glass towers, still hunched over their desks, staring impassively at their screens. As one of the best-known M&A partners once said to the trainee who ventured to remove his jacket from the back of his chair at 8.30pm on a Friday evening: “Are you cold?”

But then no trainee who chooses to go into corporate law is anticipating anything different: the legal media has already told them exactly what to expect. Despite the elaborate marketing efforts deployed by some firms to suggest otherwise, little has changed over the past 20 years – save for much improved technology, generally nicer offices, more casual clothes, and those regular supplies of fresh fruit in the communal kitchen areas.

For those lucky enough to secure a highly cherished training contract, the hours are not just variable, but unpredictable. Although they do not typically clock in until after 9am, clocking out might be as early as 6.30-7.30pm; but then again, it might be 11pm, or even 2-3am on some occasions. For anyone who works flat out in a 12-14 hour shift, the effort can be draining. At law firms such as Weil Gotshal, 12 hours a day is the average every day, while 11-hour days predominate at a large cluster of City firms, and very few demand less then 10 hours.

When they sign up, trainees routinely have to opt out from the EU Working Time Directive, which limits employees to working a maximum of 48-hours a week. This is undesirable. Multiple studies show that doing long shifts on a very regular basis may even impact on someone’s health over time. But the quid pro quo i.e. what makes the position of a trainee lawyer so very desirable, is, of course, the money on offer. At the City’s top 100 firms, this ranges from £32,000 a year to £55,000 a year from day one as a trainee. The average comes out at £37,000pa – notably more than their peers in banking (£31,520) or accountancy (£28,000).

But the real benefit arrives on qualification when the majority of trainees are retained by the law firm they been trained at for two years. Salaries of newly qualified (NQ) solicitors often double, or in some cases, even treble overnight. NQ lawyers at US firms in London do particularly well: at Akin Gump, Kirkland & Ellis, Latham and Watkins and Milbank Tweed, NQ salaries jump to £143k, while at another dozen or so US firms, it tops £100k – ranging between £105k and £120k a year.

These figures do not include bonuses (a few thousand extra for all those long hours), nor the annual uplift of £3k-£15k a year that typically follows with each added year of seniority. Meanwhile NQ salaries at the five magic circle firms lag behind in the £83k-£91k range, although they can begin to catch up in the years that follow.

Put in context, these salaries are very high by any normal benchmark. According to the Office for National Statistics (ONS), the average salary in the UK for men and women combined is £29,009, which includes those in both full-time and part work. For those in full-time work the average UK salary is £35,423 and £12,083 for those working part-time. The ONS reports that UK salaries are on the increase, with employees earning 2.5% more year-on-year, adding just under £600pa on average to their salary.

So what about that the medics? Typically, middle-aged GPs earn an average salary of £90,000 – a figure which hundreds of young lawyers have exceeded before most medical students have even completed their many years of training prior to qualification. For example, three years after qualifying, lawyers at Debevoise at Plimpton earn £170,000.  Top of the tree, at £197,000, is Kirkland & Ellis.

This means that young lawyers at elite firms, who are still in their late twenties, already earn more than Theresa May – £150,402; Jeremy Corbyn – £136,762; or Sadiq Khan – £143,911. By the time they move beyond thirty, an increasing number of lawyers have already surpassed the recently increased salary of a High Court judge – £185,197 – up 2% on a year ago. Of course, once senior associates make it to partner level in their mid-thirties, incomes start to become a multiple of that figure.

What then makes a young man or woman of 25-30 worth so much money? Are their skill sets, their levels of responsibility, or the quality of their output so valuable that they are manifestly worth every penny of their, no doubt, very hard-earned money? The answer is yes and no.

The charging structure of law firms allows for the work of newly qualified associates – and occasionally even trainees – to be charged out to clients at anywhere between £150 and £250 an hour, sometimes higher, depending on the firm and the client. The more senior the associate, the higher the charge out rate can reach. On that basis, the investment a law firms makes in each trainee, which consistently exceeds £200,000 over two years (taking account of law school fees, salary and attendant employee costs), starts to be recouped on qualification when their time becomes billable to clients.

Judged on their output, the more billable hours, the more valuable an associate becomes as an economic resource. At 1500 billable hours a year, they start to pay back the investment rather handsomely. Move towards the 1800-2000 billable hours’ level and the numbers begin to look very attractive indeed – at least on a managing partner’s spreadsheet. On billing capacity alone, they are indeed worth every penny of their salaries, and then some.

Based on the other two criteria, skill set and level of responsibility, salary levels are decidedly less easy to justify. At most firms, trainees spend their two years of training in four different seats of six months each; in some cases, this becomes eight slots of three months. Just as they start to become a useful resource, they move on elsewhere and begin all over again. As a result, the newly qualified lawyer has a passable breadth of knowledge, but little depth. That only comes with time and experience – two to three years in one department and they can develop as a real asset. But not on day one when the (relatively) big bucks start rolling in.

And responsibility? Yes, there are celebrated occasions when some US firms send off a 26 year-old to deal with the intricate problems of a high profile client. But these occasions are rare; so rare that they tend to be talked about. More often, the young associate is preparing, compiling, collating, checking and reviewing documents – lots of them. In their occasional meetings with clients, they are required to say little, or nothing at all. And their work is always checked, and where necessary, double-checked. So for all the money that they are earning, their responsibility remains generally quite low for quite some time. In practice, it is only assumed incrementally over several years.

Here, the contrast with the Prime Minister, a High Court judge, or the surgeon performing an operation could not be starker. And yet their earnings may be similar, or even greater. This unprecedented situation seems set to continue: the increase in young lawyers’ salaries over the past decade far exceeds those on the public payroll. Another decade or two of similar differentials in the level of increase, based entirely on market forces, and it may become the new normal for almost every newly qualified City lawyer. Without any disrespect for the very hard work that they do, one must ask: are they really worth it?

 

 

Dominic Carman

Written by:

Dominic Carman, journalist, writer and legal commentator.
www.dominiccarman.com