People

Introduction

This year’s survey shows that workforce management and remuneration structuring continue to represent key challenges at Board level. Finding the right level and mix of staff is critical to delivering improved profitability, particularly in a market that is undergoing significant change. As staff costs remain under pressure, thanks to increases in salary levels for fee earners and an expensive bottleneck emerging at the >5 years PQE level.  These factors are only partially offset by increases in hourly rates, improved productivity and controlling the cost of back office support.  

Read our 'at a glance' preview below for more on this section.

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At a glance

Headcount

  • Average total fee earner headcount has fallen across the Top 25 bandings. The fall in fee earner headcount in the Top 10 and 11-25 firms was on average 3% and 11% respectively. In contrast, the Top 26-50 saw an increase of 8%, with the Top 51-100 seeing an increase of 4.6%.
  • In Top 25 firms, the greatest reduction in fee earners is below the >5 year pqe grade. Numbers in the newly qualified grade fell in the Top 10 by on average 24% and in the Top 11-25 by 22%. Headcount in the 1-2 years pqe grade fell by 13% in Top 10 and by 28% in Top 11-25 firms. These reductions appear to be managed attrition in response to falling utilisation in recent years, rather than wholesale redundancies. We note that the Top 26-50 firms appear to be investing in people, with the newly qualified headcount up by 33%.
  • The > 5 year pqe grade represents a growing proportion of fee earner headcount in Top 25 firms. Given the tight management of partner numbers, this suggests an increasing bottle-neck at this grade which may be a concern in terms of retaining key talent and ensuring effective and cost efficient allocation of resource.
  • This year the survey shows an increase in business support headcount in the Top 10 (5%) and Top 26-50 (22%) but a continued reduction in the Top 11-25 (6%).

Chargeable hours

  • Following declining utilisation in 2016 and 2017, there has been a general increase in actual chargeable hours in Top 10, 11-25 and 26-50 firms across the majority of grades. For example, the average increase across the 1-5 years pqe grade is 5.9% to 1,478 hours in the Top 10 and 2.8% to 1,309 hours in the Top 11-25. Further, the survey reveals an increase in target chargeable hours for all grades in the Top 25.
  • Average spare capacity (i.e. excess headcount based on the difference between target and actual chargeable hours) in the Top 50 has fallen and reflects improved utilisation and falling fee earner headcount. The reduction in average spare capacity is seen from 1-2 year pqe up to partner level in Top 10 and 26-50 firms, but is not reflected in the Top 11-25 where only the >5 year pqe and newly qualified grades reduced their spare capacity as targets were increased.

Leverage and Cost

  • The range of the ratio of fee earners to non-fee earners is from 1.3 in Top 10 firms to 1.6 in Top 11-25 firms and all bandings have remained consistent with prior year.
  • There has been a mix of movements in the ratio of fee earners to full equity partners. Top 10 and 26-50 firms saw this ratio grow, from 6.7 to 7.2 and from 8.3 to 9.1 respectively. The fall in this ratio in Top 11-25 firms was from 7.7 to 7.5 and in Top 51-100 from 9.9 to 9.0.
  • The trend of increasing fee earners per secretary has halted this year, with only the Top 26-50 increasing this ratio, from 4.3 to 4.4. Top 11-25 firms held this ratio at 5.2, whilst it fell for the Top 10 and 51-100 firms, from 5.9 to 5.6 and from 5.0 to 4.0 respectively.
  • Costs per fee earner have increased across all bandings (in the Top 25 by 8% and in the Top 26-100 by 7%) which reflects (i) increasing pay levels resulting from the competition in attracting and retaining talent; and (ii) the movement in mix of grades.

Partner remuneration

  • Performance-based partner reward models continue to be most prevalent in the Top 50. Profitability, fee income and chargeable time remain key metrics that impact partner remuneration. For Top 10 firms, referral of work is a more prevalent metric than in other bandings and working capital is an increasingly important performance measure outside the Top 10.

Diversity

  • Female representation at partner level has increased over the last 5 years, with Top 51-100 firms leading the way (2011-2018 Top 10: 13.2% -18.5%, Top 51-100: 15.9% - 23.5%). Firms across all bandings continue to recruit more females than males at trainee level.
  • In Top 10 and 11-25 firms, BAME representation is low at partner level, reducing from 19% and 18% at trainee grade respectively, to 7% and 8% at full equity partner level. 
  • At the time of survey completion, a significant number of firms had not included partners in their gender pay gap reporting; however, we know that a number of law firms have since reported gender pay gap including partners.
  • Despite the level of attention that gender pay gap generates, 39% of all Top 100 firms stated they had no planned actions to address gender pay gap. For those that do have plans, the most common are learning and development, and reward.

Contact us

Carol Mynott

Director, PwC United Kingdom

Tel: +44 (0)7980 606069

Catherine Usher

Executive reward senior manager, PwC United Kingdom

Tel: +44 (0)7595 849946

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