Adapting To A Competitive Market

As CEO of JMC Legal Recruitment, I can confidently say that remuneration and pay are always among the most talked-about topics in the legal industry. Journalists and broadcasters frequently call me for my perspective on the ongoing salary shifts. Having spent over 12 years in this space, I’ve seen it all—from quiet periods to explosive growth. But what we’re witnessing right now is a unique combination of competitive market forces, inflation, and cost-of-living pressures driving up salaries at a remarkable rate. 

The Impact of Rising Salaries in Law 

In the past year, salaries in the legal sector have hit new heights, particularly in top-tier and Magic Circle firms. Newly qualified (NQ) solicitors at leading London firms are now regularly earning over £150,000 annually. Let that sink in for a moment—some first-year associates are now making £150k+  straight out of training. This surge has been most noticeable in the bigger city firms and US firms, where competition is fierce. I’ve lost count of how many articles I’ve read about salary wars between these firms! 

But it's not just London. Even regional firms, historically more conservative in their pay structures, are feeling the pressure to raise wages to keep up. Trainee salaries have increased, with regional firms now offering £35,000 to £45,000 to attract fresh talent. At the same time, the gap between the big-city salaries and regional offerings is still considerable. 

Why Are Salaries Increasing? 

So, what’s driving this? The simple answer is demand. The legal market is highly competitive right now. Firms are battling to secure top talent, particularly in key practice areas like corporate, real estate, and mergers & acquisitions. This demand-supply imbalance has inflated salaries across the board. 

One of the things I always say is that salaries tend to rise when there's demand in a specific practice area, but what happens if that demand slows down? This is where it gets tricky. If a firm hires aggressively during a boom—say in real estate, for example—and that market cools, they may find themselves with highly paid lawyers in less demand. It’s a delicate balancing act. Law firms need to think long-term when they bring someone in on a high salary. 

We saw this volatility last year with the Liz Truss "mini-budget" debacle, which hit transactional markets like real estate hard. Before that, firms were in a hiring frenzy coming out of the pandemic, and salaries were climbing steadily. However, market conditions can change fast, and firms need to be prepared to adjust accordingly. 

Retention: A Key Focus 

Retention is another big topic for law firms. The cost of hiring new talent—through recruitment, training, and onboarding—can be astronomical. So, it makes sense that firms are now laser-focused on keeping their existing talent happy. At JMC, I’m constantly advising firms to think beyond just salary when it comes to retention. 

Let’s take Eversheds Sutherland as an example. Their autumn trainee retention rate was 76%, but they increased this to 79% annually by bringing in some trainees earlier through their "time to count" initiative. On the surface, that’s a decent retention rate, but compared to firms like Freshfields, which retained 86% of their trainees, it’s clear that some firms are more successful in holding onto their talent. 

Why does Freshfields have such a high retention rate? It’s not just about the pay. Freshfields offers a strong training program, opportunities for development, and a supportive firm culture—all crucial in retaining junior solicitors. Yes, they pay top dollar, but they’re also creating an environment where people want to stay. 

Do’s and Don’ts for Retaining Talent 

Do’s: 

1. Invest in Training and Development: People want to know their career is going somewhere. At JMC, we see that junior solicitors are hungry for learning opportunities and exposure to high-quality work. Offering things like secondments, mentoring, and leadership development is crucial to retention. The firms doing this well are the ones keeping their people. 

2. Prioritise Well-being and Flexibility: Work-life balance and mental health have never been more important. Firms need to prioritise well-being initiatives. This could mean offering flexible working hours or mental health support—things that really make a difference to a lawyer’s quality of life. The firms that get this right will have a much easier time keeping talent onboard. 

Don’ts: 

1. Don’t Rely Solely on Salary: Sure, salary is a key factor, but it’s not the only factor. In my conversations with candidates, it’s rarely their top concern. Junior lawyers, in particular, are looking for more than just money. They want prestige, quality work, and a firm that aligns with their values. If you’re only competing on salary, you’re missing a trick. 

2. Don’t Be Rigid with Pay Structures: The old-school approach of rigid pay scales based on post-qualification experience (PQE) is dying out. Firms are realising that two lawyers with the same number of years’ experience can have vastly different skill sets and exposure. Pay needs to reflect ability and contribution, not just how long someone has been in the game. 

Looking Ahead 

Where are we heading in the next six months? From what I’m hearing in conversations with firm owners and senior partners, we’re in for a busy period. Firms are in growth mode, and salaries are likely to keep rising. However, with costs mounting—especially given the cost-of-living crisis—firms will need to focus on more than just pay to keep their best talent. 

I expect to see a continued focus on retention strategies, with firms offering not just competitive pay but also clear career progression, flexible working, and support for mental health. The market is competitive, but it’s also evolving. Firms that adapt to these changes will thrive, while those stuck in old ways of thinking may struggle to keep up.