In 2014, the minimum salary for trainee solicitors will be abolished. JDG Chambers assesses the impact this will have on current students.

Two years from now, law firms in England and Wales will no longer be required to pay trainee solicitors a minimum salary, which on current levels requires trainees in central London to be paid at least £18,590 and their peers outside the capital £16,650.

This decision by the Solicitors Regulation Authority (SRA) is likely to affect the 42% of trainees who work at smaller law firms, fondly described by the SRA as the 'lower tier' legal market.

More than three-quarters of these trainees currently get paid the minimum amount, with the remainder receiving slightly higher salaries.

Once the minimum salary is abolished, the national minimum wage of £6.19 per hour will kick in, equating to an annual salary of about £12,500 – a potential £4,000 less for trainees outside London being paid the minimum salary, representing a 25% wage reduction.

By way of reference, the guideline hourly rate set by the Living Wage Foundation is £8.30 in London and £7.20 outside London. ("It is not just the right thing to do, it makes absolute business sense," says Linklaters on the Living Wage Foundation's website.)

The decision to review the minimum salary came in January and it was abolished at a unanimous SRA board meeting on 16 May: five months to sweep away a minimum salary that has been in place for 30 years. Stakeholder groups opposing the SRA's decision describe it as "rushed" and "disappointing".

In its defence, the SRA says that the minimum salary has been under discussion at various committee levels since 2007, when the regulatory powers of the Law Society were split off to form the new regulator. The Law Society had been periodically reviewing it before that. So why scrap it now?

This time around, the call for a review came straight from the SRA board. Before launching the review, the board's position was based on firm free-market principles, explains Maxine Warr, a policy manager at the SRA's education and training unit.

"Setting a minimum salary for trainee solicitors is a significant regulatory intervention, which the SRA should only be making if we can clearly justify that it meets our regulatory objectives under the Legal Services Act (LSA).

"When debating it originally, the board couldn't see how setting a minimum salary for trainee solicitors did in fact help us to advance our regulatory objectives."

Exactly what Section 1 of the LSA requires from the SRA, by way of encouraging an "independent, strong, diverse and effective legal profession", is the source of unwinnable arguments and perpetual disagreement.

In truth, the SRA is generally uncomfortable at being the only professional regulator to set a minimum salary. It is arguably the SRA's strongest argument and the only one based on hard facts. No other regulatory body does intervene in this way (although doctors and teachers have minimum salaries set by the Government).

The closest comparison is the Bar Standards Board, which sets a £12,000 equivalent of the minimum salary, but that is in line with the national minimum wage and it only exists because pupils are exempted from that legislation.

What's more, a lot has changed since the Law Society introduced the minimum salary for trainee solicitors in 1982, most importantly the introduction of the national minimum wage in 1999.

Still, the minimum salary for training solicitors has existed for 30 years. Electing to abolish anything that has been around for that long would need a thoroughly convincing argument in favour of it, backed up by facts and robust reasoning – something more compelling than regulatory unease.

"Taking away the minimum salary for trainee solicitors was always going be a difficult decision, so clearly the board wanted to go away and do some research and consultation," says Warr. 

Negative feedback

Starting at the beginning of the year, the SRA's research and consultation covered a formal consultation; a series of focus groups; an online survey of law firms, trainees, paralegals and students; and meetings with stakeholder groups, all of which culminated in the publication of a 123-page economic and equality impact assessment this April.

During this consultation, most stakeholder groups such as the Junior Lawyers Division of the Law Society (JLD), the Association of Women Solicitors (AWS) and the Society of Asian Lawyers (SAL) came out firmly against abolishing the minimum salary, all except the Sole Practitioners Group (SPG), which represents small partnerships.

The critical issue between the SRA and these opposing stakeholder groups is the trade-off between a potential increase in the total number of training contracts on offer and a reduction in the average salary paid to trainees.

Most other related arguments on equality, diversity and access to the profession end up slugging it out over this point.

When the minimum salary is abolished, the SRA expects to see the number of training contracts increasing. Support for this comes from the 70% of smaller firms who, when answering the survey, said they would 'seriously consider' taking on their first trainees if the minimum salary were to be removed.

A similar view was taken by one third of smaller firms who currently do offer some training contracts.

Under the current system, sole practitioners often have to apply for a waiver to employ a trainee at below the minimum salary – a time-consuming process, according to Lubna Shuja, chair of the SPG.

This will have a positive impact on equality and diversity, argues the SRA, because the groups which it has identified as being most at risk from the decision to remove the minimum salary – mature trainees, ethnic minorities and women – tend to be over-represented at smaller firms and so will benefit more from an increase in training contracts.

Hekim Hannan, the chair of the JLD, believes that the SRA's expectations about training contract numbers is flawed. He says there are more factors that go into a law firm's hiring decision than simply salary levels.

In the SRA's impact assessment, for instance, law firms identified profitability of the firm as the most important factor.

Then there are the two thirds of firms that currently do offer training contracts who said they would not change the number they provide even if the minimum salary is abolished.

Hannan also points out that few employers have been calling for this decision to be taken – more than half of firms responding to the survey believe the SRA should set a minimum salary, nor has there been a rush of firms making a concrete commitment to offer more training contracts.

Even if the number of training contracts does go up, the AWS, SAL and JLD believe that competition for places at smaller, high street firms will push down salaries to the national minimum wage, which will have a negative effect on the quality of life for trainee solicitors.

(Hannan and Shams Rahman, chair of the SAL, both predict the decision will have a downward effect on newly-qualified salaries as well.)

This downward pressure on salaries will, they say, have a detrimental effect on access to the profession.

Rahman explains: "A lot of our members at the junior level may be more likely to come from a disadvantaged family and the inner city. On the one hand, people in those communities are told to be aspiring to become professionals, to become lawyers.

"But on the other hand, where they don't have that financial support from their parents or families, they will find themselves completely unstuck."

Elite or elitist?

Abolishing the minimum salary is not a traditional issue about discrimination towards a particular protected group, such as ethnic minorities or women. There are, for instance, more women in law, so more women will be affected by the abolition of the minimum salary.

Women also form a larger proportion of the trainee population at smaller firms where salaries are generally lower, so tend to be paid less. Nonetheless, the SRA's decision will apply to men and women alike.

Rather, the underlying 'discrimination' that unites these groups is the economic impact of the decision, which will affect rich and poor students in different ways.

The abolition of the trainee minimum salary, moreover, comes at a time when university fees are on the rise.

The majority of trainees at all tiers of the legal market have debts of between £5,000 and £26,000, according to the SRA's figures. This is set to rise with the hike in university tuition fees to £9,000 per year.

To Joy Van Cooten, chair of the AWS, the SRA's sums don't add up: "It's going to make the profession more elitist. It's only going to be the people whose parents have money who can enter the law.

"We're looking for a diverse legal profession – abolishing the trainee minimum salary will not do that."

The SAL and the JLD share this view about the profession's step back towards elitism. Social mobility is one of the last issues the profession has to deal with at entry level, according to Hannan.

Tellingly, 77% of trainees who took part in the SRA's survey thought abolishing the minimum salary would have a negative impact on access to the profession for people from less affluent backgrounds, compared to 60% who thought it would have a negative impact on the basis of gender, age, disability or ethnicity.

Additional results from the SRA survey suggest that nearly half (47%) of trainees and exactly half of students and paralegals would not be able to pursue a career as a solicitor if the abolition of the minimum salary led to a drop in training contract salaries (more than 90% of trainees, students and paralegals believe the SRA should be setting a minimum salary).

The SRA discussed the 47% statistic "quite a lot" and it "gave rise to some concern", according to Tim Pearce, another member of the SRA's education and training unit.

All the same, Pearce questions both the veracity and the validity of the finding: "When you are asking individuals to predict their future behaviour, there is naturally a strong element of bias to what people say.

"That bias may well be very unconscious, but at the same time the answer is not completely external and objective." 

Added to that, Pearce highlights the responses to several follow-on questions, which asked these same trainees, paralegals and students to identify the main reasons why they wanted to enter the profession.

"The first factor was 'Do I want to be a lawyer?' as opposed to a doctor, accountant or whatever. The second factor is the eventual earning potential.

"Thirdly would be the element that the law plays in society. All those accounted for far more significance than the initial earnings," he says.

To the SRA, this proves that salary is not a motivating factor for people in choosing the profession.

Naturally, both sides jump on the statistics that suit their cause and ignore or play down contrary findings. The problem with these statistics, though, is that they are not really findings at all, more like surveys based on self-interest.

The SRA doubts the objectivity of trainees responding to the survey in one breath, alluding to their obvious bias in maintaining higher salary rates.

In the next breath, the SRA is citing the views from partners of small firms supporting the abolition, with no reference to any employer bias in seeing employee salaries come down.

For their part, the stakeholder groups believe that salaries will go down and their members will suffer, but this is based on very little evidence other than a gut feeling.

The one point that the SRA and stakeholder groups do agree on is that the minimum salary is not the best tool to encourage diversity or access to the profession, although the accord does not last long.

Hannan does not see the SRA putting forward any alternatives, whereas the SRA says these initiatives are already in motion, such as the work-based learning pilot test.

Then there is the ongoing Legal and Education Training Review (LETR), which among other things will look into creating other 'pathways' into the profession. The LETR is in the research phase at the moment and the first report is not expected until the end of the year.

As no one yet knows what the outcome will be, the stakeholder groups have understandably appealed to the SRA to postpone the decision on the trainee minimum salary until after the LETR has reported back. That way, the decision can be made on a more informed basis.

But the response from the SRA on this point returns once again to the policy-minded approach it has held from the very beginning – a suspicion that has led Hannan to suspect that the SRA board had already made up its mind before the consultation was launched.

Warr explains: "The question of whether or not the board should be involved in setting salaries this way was a high-level strategic decision that could be taken separately from the work that is going on to review the education and training framework.

"The board also felt it was probably more appropriate to take this decision now. It is clearly quite an emotive decision and there were a lot of strong feelings among stakeholders, so it was better to take this decision now so it didn't detract from the important decisions and discussions that we need to make when we get the findings from our LETR."

Suck it and see

The original reason for the minimum salary 30 years ago was to prevent the exploitation of trainee solicitors and to entice high-calibre students into the profession.

In both respects, the profession is in good standing. In the main, the diversity of the profession should also be applauded.

The questions stakeholder groups are asking are: Why put that all at risk? Why risk returning to an elite profession? Why risk losing talent or going backwards on diversity, especially when employers are not asking for the minimum salary to be abolished and trainees certainly don't want it? Why launch a consultation if you are not going to listen?

The SRA admits that there is limited data to help them assess the impact of this decision. An open and engaging consultation was, therefore, meant to be a key consideration for the SRA, even though the regulator went on to effectively ignore the vast number of respondents who told them not to go ahead with it.

To make the SRA's decision appear even more speculative, there are no precedents from other professions to rely on.

To quote the SRA's impact assessment: "There are no identifiable examples of a minimum training salary being removed from a professional qualification route in the recent past."

When pushed on this point, Warr concedes: "We will be in a better position 12 months after it comes into effect to be able to talk a little more about the impact."

So to axe the minimum salary regardless is a big gamble to take. The SRA may soon find that a newly reduced trainee salary becomes more of an issue for students choosing the profession, as the 'high calibre' candidates look to other professions.

Even then, the SRA has a counter-argument to make, which typifies the kind of torturous logic that has characterised this debate.

"As a regulator, our role is to ensure standards of people coming in the profession," argues Warr.

"But our role is not to restrict access to only an elite group of people in the profession, such as only those of a high calibre. Our role is to ensure access to anybody who can meet the minimum standards that we set.

"It would be wrong of us to have a regulatory intervention, which in any way restricted access to an elite high calibre of people."

The minimum salary will only be abolished in August 2014 so that the current batch of trainees won't be affected. This is considered fair since they would have had no prior notice of a potential salary reduction before starting their training contracts.

For stakeholder groups such as the AWS, the JLD and the SAL, that means they have little time to continue lobbying the SRA for a policy U-turn.

In the meantime, the AWS plans to raise awareness among its young members about the ramifications of the future salary drop.

Meanwhile, the JLD is working with the Law Society on putting together a JLD recommended salary, in the same vein as the Living Wage, which they hope law firms will follow.