A report this week by City recruitment company Edwards Gibson arguing that law firms need to reassess pay for junior lawyers is particularly timely, given our cover story today. 

The recruiter's claim that top law firms should consider substantially cutting newly qualified salaries comes as Legal Week research shows staff costs at the UK's leading law firms are continuing to soar, with total costs across the bulk of the top 30 up 7% year-on-year to a grand total of £4.5bn – well over a third of total fee income.

Now, given major merger deals during the last year mean staff numbers across the group grew by nearly 6%, the increase in spending is only a little ahead of this. And, of course, staff costs are bound to be high in a service industry like the law.

But that doesn't mean there isn't room for firms to make savings – particularly at a time when the poor job market means attrition is falling and partner prospects are limited.

It's an area where our research shows some firms have made more progress than others, with a stark difference between those at the top and the bottom of the scale in terms of the proportion of revenues paid out in staff costs. 

While the likes of Olswang, CMS Cameron McKenna and Addleshaw Goddard are among the more prudent, with costs comprising little more than 30% of income, at the top end of the scale, DAC Beachcroft and SNR Denton are paying out more than 50% of turnover on their staff.

It is notable that the three firms where salaries make up the lowest percentage of income have all been making use of cost-cutting measures such as outsourcing and increased use of paralegals – in one instance very controversially.

By and large, such initiatives are no longer provoking outcry, as increasing numbers of top law firms face up to the realities of the market and draw up some form of low-cost offering for clients. And the trend only looks set to increase. 

But, as Edwards Gibson argues, the area firms need to address – and soon – is associate salaries. More specifically, law firms need to look at reducing starting pay for their most junior lawyers – particularly those in less profitable practice areas.

To some extent, many have already made such adjustments for slightly more senior lawyers, with moves towards more merit-based pay. However, little has so far been done at the newly qualified and one-year post-qualification level. 

It's an idea that would clearly be highly controversial, as introducing disparities in pay on qualification would be unpopular and make recruitment more difficult in less glamorous practice areas. But that doesn't mean it should be written off outright. As firms gear up for the May associate salary reviews, it will be interesting to see if anyone is brave enough to give it a go.