Why are Lawyers moving away from Private Practice?
posted 16 Aug 23
Typically, roles within private practice provide more lucrative opportunities. Working in this side of the legal sector often comes with higher salaries, and the chance to earn partner status drives many Lawyers.
In the legal sector, there’s a noticeable increase in experts turning their back on private practice and moving into in-house roles. While this isn’t a mass exodus, it’s enough to mark a significant change in attitudes across the industry. There are currently an estimated 31,000 registered in-house solicitors in the UK, a figure which has tripled over the past 20 years.
Why are people leaving private practice to move in-house?
Although there are many reasons people leave private practice to pursue an in-house role, the typical reasons include a better work-life balance, reduced workload, smaller client portfolio, and the lack of new business work required.
Typically, roles within private practice provide more lucrative opportunities. Working in this side of the legal sector often comes with higher salaries, and the chance to earn partner status drives many Lawyers. In London, around 75% of partners earned more than £250,000 with the top 2% exceeding £2 million. In comparison, our research shows an in-house head of legal role salary ranges from £95,000 to £160,000.
However, while the private practice roles have a monetary advantage, they also come with increased workloads which often are not compatible with managing commitments outside of the boardroom.
Whilst figures vary dramatically from firm to firm, some practices can have hundreds of clients in any given month, especially in areas with a fast case turnaround. If adequate talent is not sourced, this leads to increased workloads for the existing workforce. This issue has been exacerbated by COVID-19 in a number areas:
Lockdown placed additional strain on struggling marriages and consequently the number of people seeking divorce increased. The term “filing for divorce” increased by 567% from December 2019 to December 2020 and "divorce lawyer near me” has risen by 233%. This in turn has created a huge demand for divorce and family lawyers.
The freeze of stamp duty also saw a huge increase in people looking to buy and sell property meaning conveyancing departments experienced a huge upturn in work. Property transactions saw an increase of 12% from Q4 2020 to Q1 2021 alone with property and conveyancing litigation job advertisements increasing 345% over the past 12 months.
In the commercial domain, COVID-19 created an abundance of work for legal teams, both in-house and private practice. From contract negotiations to compliant management of furlough schemes, the extent of work presented to commercial legal professionals was unprecedented and relentless.
In addition to increased legal workload, those working in private practice also experience an additional work stream in the form of business development. Often regarded as business partners, as opposed to pure legal representation the identification, securing and on-boarding of new clients presents an additional mountain of work. While this is a welcomed part of the job for many more commercially-minded professionals, those that entered the legal industry for a love of practicing law may find themselves spending more time on business development than initially perceived with an in-house role allowing them to pursue their passion.
With multiple clients to manage, new business development, and general admin, the career path to partner can leave little time for much else. For many, this environment provides an excellent chance to thrive, but those with personal commitments can struggle to maintain the balance between personal and professional life.
We sat down with James Franklin, Director of Search Legal to garner further insights into why people moved from one side of the sector to the other:
If we look at the last ten years, people have always moved from private practice to in-house. However, recently there’s been a steady increase in the proportion of people who want to move. For many, it is related to work-life balance. Private practice lawyers work extremely long hours and struggle to balance ‘at work’ and ‘family life.’ Many don’t want to work within a law firm itself for some of the political reasons which may come up internally. Other lawyers are not that sales-focused, they’re academic, they enjoy the law, they like advising, but they are not interested in building businesses.
How does progression in private practice affect female legal professionals?
At a newly qualified level, the gender ratio sees women in the majority. However, as soon as you begin to look at the number of female partners in law firms, this shrinks to between 20-30%.
The reason for this is not a lack of ambition to reach the more senior positions, it’s the rigid approach to work. Long hours have a heavy impact on family life. As women are expected to sacrifice their careers to raise children, those looking to start a family find themselves struggling to progress.
The potential lack of work-life balance within private practice arguably impacts female lawyers more so than their male counterparts. The UK’s legal sector has suffered from gender disparity, and this lack of flexibility plays a role. Since 2017, the majority of practising solicitors have been female, yet they only make up 20% of full equity partnerships, according to the Financial Times. This gender gap is also highlighted by the number of women choosing in-house roles, with The Guardian claiming a majority of the UK’s female legal experts fill these roles.
The lack of diversity at the senior end of law firms becomes quite skewed. It is around about 50/50 male to female at the newly qualified level. By the time lawyers go through the next ten years and they’re either going in-house or looking for partnership opportunities in private practice, on average, and this is not applicable to all law firms, but very much on the whole, the amount of female partners in a law firm accounts for about 30%. So, there is a big change in balance of the male/female ratio at that point.
Working in-house for a private or public company can also include drawbacks. Not only does the salary tend to be lower, but with fewer opportunities for promotions, career progression paths are often shorter. Recent research we conducted however shows that larger salaries are not necessarily a deciding factor for job choice in the legal industry. Two-thirds of the UK’s workforce value benefits almost as much as the salary. With regular work hours, a more consistent workload, and less pressure on billable time, in-house roles typically provide a more stable environment for legal professionals.
It is important, however, to recognise the increase in workload in-house legal teams are anticipating in the coming months. In a survey conducted in June 2021, City firm, Ashurst, stated that almost two-thirds of in-house legal departments predict an increase in work loads despite no new hires and a potential reduction in budget. The main causes for this increase are an increased complexity in post-Brexit business negotiations and the aftermath of COVID-19 legislation.
What is driving the demand for in-house lawyers?
As the need for in-house lawyers continues to increase, we need to examine why many of moving away from investing in private practice representation.
One of the main driving forces behind this is cost, speaking to The Law Society, Sapna Bedi FitzGerald, Head of Legal at LSL Property Services was quoted:
An in-house department is still cheaper than retaining external lawyers. With companies across the UK tightening budgets, especially during the pandemic, building, training, and retaining legal teams allows them to keep work in-house.
When discussing the causes for this demand, James Franklin told us:
There is a point in a company’s evolution where legal needs to be in-house. Once businesses hit a certain amount of revenue, their contracts become more complicated and they’re open to a broader range of contentious and regulatory matters. It becomes a cost-effective way of managing legal spending. In organisations such as global banks with upwards of 300 lawyers, the savings made by having your in-house legal function are significant. It stops reliance on using and spending too much money on law firms. Equally, it allows the company to move more dynamically and call upon a huge resource to advise on issues such as M&A activity, litigation, or general commercial matters.
Agility is another key issue which has risen in importance over the past 12 months. As businesses were forced to revolutionise their business practices overnight at the discretion of governmental changes, in-house representation allowed legal teams to respond and put plans in place almost immediately.
Arguably, this would have been a longer and more expensive feat if outsourced to an external firm. The same sentiment can be applied to crisis management. Having an in-house team, fully knowledgeable on the businesses and its objectives, can work to mitigate a crisis quickly and effectively.
Today, companies are also facing an increasing amount of legal issues from anti-bribery and corruption procedures to GDPR. With plenty of hurdles to overcome, in-house roles can offer plenty of variety, helping experts build their experience and work towards becoming general counsel. Combine this progression with the potential for flexible working hours, and these opportunities become more attractive for those who value benefits alongside salary.
What issues does a demand for in-house lawyers create for private practice and the legal talent pool?
Through our 2021 Salary & Benefits Guide, we discovered that 77% of managers within the sector are struggling from a persistent skills gap. 70% expect their headcounts to grow in 2021, but the businesses trying to bring in new talent find themselves with an average recruitment lead time of around 4.8 months.
However, when it comes to lawyers leaving firms and heading in-house, many private practices see that as an opportunity, not a hindrance. Despite businesses hiring their legal teams in-house, there will be outsourcing taking place.
It’s more of an assistance to a law firm to have some of their staff working within a business. If they’re commercial and they see that as a commercial proposition, they may well receive referred work back from that lawyer.
However, it is not just the impact of people moving from private practice to in-house that law firms must contend with. In an attempt to secure the best talent in the industry, law firms have been forced to increase salaries to improve their proposition to potential clients which has led to increasing salary expectations of the talent pool. While private practice don’t see movement to in-house as a loss, they are seeing major US law firms driving up the costs of recruitment.
Newly qualified lawyers in top US law firms now earning on average $170-180 thousand. That’s the problem private practice has, how do you compete with such high salaries?
This has led to UK talent working for overseas firms and reaping the benefits, leaving more local firms with a significant deficiency.
To attract more candidates to private practice, law firms have had to invest in candidate attraction campaigns, including generating additional, and more niche, job roles. An example of this is business development roles. Whilst previously it was partners and senior associates that lead on business development, increasingly firms are hiring specialists in business development to help grow revenue. This allows senior associates and partners to concentrate on delivering within the legal discipline, reducing work streams and making the role more viable to those who do not have an affinity with sales based roles. The same process has been applied to client management which is often granted to the more senior members of the team.
Private practice firms are also improving their benefits packages for lawyers of all levels in a bid to attract top talent, with a lot of the soft benefits focusing on culture.
Lawyers like the opportunity to work with various parts of the business, and the biggest theme I’ve heard from lawyers over the years, is that they like to feel valued in the business. So, they can be part of a deal, part of a case, right at the very start, they’re not just brought in an advisory role. They’re actually there right at the start, getting into the commercials, and being part of the presentation team, particularly if that is a business going out to sell or buy.
Conclusion
While legal experts swapping private practice for in-house roles is nothing new, there’s been a stark increase, especially among women in the sector. One of the leading causes for the switch is the pursuit of a better work-life balance, with many willing to sacrifice their salary for reduced hours and more flexibility.
One of the problems I’ve thought about for many years is - how can law firms address losing some of their best talent to other companies? Having helped numerous lawyers move from private practice to in-house, it comes down to work life. Money is less of a factor, but in some cases, there have been increases in compensation packages.
To retain diverse talent and help them enter the top roles, private practice need to be more aware of the barriers preventing progression. The current environment offers little to no flexibility, and unless the sector addresses this, they’ll continue to see staff move in-house or leave the industry entirely.
