THE MINIMUM SALARY

 The Minimum Salary is currently under threat.

In the light of the new consultations on the way in which solicitors should be trained, there is a proposal to remove the protections currently enjoyed by trainees.  One of these is the Minimum Salary.

The LSRB is looking for views on the salary, and has begun a consultation exercise.  The TSG has been asked to comment.

The TSG have lobbied hard for this protection in the past, and feel that it is greatly valuable.  Further, we feel that to remove it would limit access to the profession and open up trainees to exploitation.  However, we would like your views on the subject before we respond to the LSRB on this point.

Please find the background to the salary below, and some information concerning the aims of the introduction of this protection.  The links for the TSG and LSRB survey appear at the end of the page.

We look forward to hearing your opinions on the subject.

THE CONSULTATION

Background

Each year, almost 6,000 trainees enter into training contracts with the aim of qualifying as a solicitor. Each of these trainees is entitled to be paid a minimum salary by their employer for the period of their training.

The Law Society Regulation Board – which will become known as the Solicitors Regulation Authority from 2007 – is seeking views on the desirability of a continuing role in the regulation of trainee solicitor salaries. The key issues on which the board is seeking views are:

• The perceived purpose of the prescribed minimum salary for trainees
• The impact of the removal, or retention, of this requirement on the supply of training contracts
• Whether the board should have a continuing role in the setting of trainee salary levels

History of the Minimum Salary

The requirement for employers to pay a minimum salary to trainee solicitors was introduced in 1982, firstly to encourage high calibre graduates to enter the profession and secondly to avoid any exploitation of potential entrants in the competitive market place for training places.  The salary was introduced follwoing pressure from elements of the profession - inclduing the TSG.

By 1985, the minimum salary level was set at the level of the average graduate salary and was increased on an annual basis up to 1991. However, between 1992 and 1999, the minimum salary remained static. Again, the TSG began to lobby the Law Society for reform.  The Group requested that there should be an annual review of the salary, and that those undertaking the training to be a solicitor should not be exploited.

In 2000, the Law Society’s Council agreed that the minimum salary level should be increased every two years and should, in due course, reflect the increase in the Retail Price Index (RPI) since 1992. In July 2004, the Council agreed that the minimum salary level should be increased annually and by 2006 it had reached a level commensurate with annual increases in line with RPI since 1991.

Please see the files below concerning the TSG and the minimum salary.  They include information about the Gender Gap in trainee pay and press releases from the TSG when undertaking its lobbying.

Gender Pay Gap for Trainees

Minimum Salary  - 2000

Minimum Salary  - 2002

Minimum Salary  - 2003

Minimum Salary  - 2004

Minimum Salary - 2005

Current Situation

The current minimum salary level is £17,110 in central London and £15,332 outside London. The 2006 level took trainees outside of London over the £15,000 earnings threshold set by the student loans company beyond which students will have to start repaying their student loans.

Law Society research suggests that the majority of trainees are paid above the minimum salary with the average salaries rising to £20,796 in 2005 (£27,094 in Central London and £17,167 outside, with the lowest average salary in Wales at £15,454) (Source: Law Society Annual Statistical Report 2005, page 46, paragraph 8.13).  Analysis of salaries paid to current trainees shows that around 80 per cent of trainees in London are paid at more than 20 per cent above the minimum salary, compared to 30 per cent outside London (Source: Law Society Regis database). It should also be noted that Law Society data only covers starting salaries and some trainees will receive an increase in their salary throughout the period of the training contract. Figures for trainees paid below the minimum salary are unclear, but in 2005 only 25 applications for a waiver of the minimum salary level were granted.

The View of the Minimum Salary

Feedback has been sought on the requirement to pay a minimum salary on a number of occasions since its introduction in 1982. In 1991, when consulted, a majority of those who responded favoured retaining the requirement. On further consultation in 1992, views were divided. This led to debate and agreement by the Law Society Council to retain the requirement.

A further consultation was carried out in 1996 following continued debate on the issue. A majority of respondents, particularly those responding from firms and organisations employing trainees, favoured abolition of a compulsory minimum salary preferring instead the publication of a recommended salary as the minimum salary level was considered too high and did not recognise geographical differences. Some respondents also referred to ’over regulation’ and a desire for salaries to be determined by the market. Some indicated that they would employ more trainees or would start to employ trainees if the minimum salary requirement was removed. Respondents who favoured retention of the minimum salary did so because of concerns about the potential for exploitation of trainees. When the Society’s Council considered the issue, it decided to retain the minimum salary pending a full review of the training contract. This review took place in 1999, when it was decided that the Society should continue to prescribe a minimum salary in order to attract high calibre graduates into the profession.

Debt and the Minimum Salary

The key drivers historically for retaining the minimum salary have been the desire to attract high calibre graduates into the solicitors’ profession to ensure that the profession remains competitive and the desire to avoid any potential exploitation of trainees seeking to qualify as solicitors.

The levels of debt incurred by many students during their undergraduate and Legal Practice Course (LPC) studies and the salaries that need to be secured by trainees to service these debts continue to be a concern although these are not unique to the law. In 2005, a survey by the British Medical Association showed that the average debt for final year medical students topped £20,000, up 17 per cent on the previous year (Source: Medicalnewstoday.com – Medical Students News, 27 December 2005 – Medical Student Debt Tops £20,000).

Training Availability and the Minimum Salary

There are also concerns about actual or potential shortfalls between the demand for training contracts and the available supply. It is not possible to accurately assess the mismatch between LPC graduates and training contracts available – some students complete the LPC but do not have to complete a training contract (eg Fellows of the Institute of Legal Executives); some LPC graduates may be successful in their search for a training contract several years after completing their course; others may decide not to pursue a career as a solicitor after completing the course and others will be concurrently working in a training contract whilst studying part-time on an LPC. However, an indication is included in Law Society statistics for 2004/2005 which show that 5,734 training contracts were registered whilst 8,649 students were enrolled on the LPC (Source: Law Society Annual Statistical Report 2005, pages 41-42, table 8.7 and page 39, table 8.2).

The evidence suggests that for many LPC graduates who do obtain training contracts in the larger commercial firms, the minimum salary is irrelevant – market forces and the competition between firms for the best talent, means that many trainees are paid well above the minimum. The fact that many of these firms also pay for the cost of the LPC course and a maintenance grant for this year, none of which is required, supports this view. The minimum salary is seen as a means of encouraging access to the profession on the basis of ability rather than financial need yet the best payers will go for the best talent regardless of the wealth or otherwise of the applicants. It has also been argued in previous consultations that the minimum salary demonstrates the profession’s commitment to the future of its profession and employers’ commitment to the provision of effective training. It is the calibre of trainees on admission, however, rather than salary levels, that provide the best evidence of effective training and development.

Respondents to previous consultations have also argued that trainee salary levels should be left to market forces and that the imposition of a minimum salary discourages some firms from employing trainees which, in turn, creates a barrier to entry to the profession. (It has even been suggested that the minimum salary keeps salaries artificially lower than they would be in a normal market situation.) Concerns also continue to be raised about the limited opportunities for trainees to secure training contracts in smaller high street firms. (There has been only a 2.6 per cent rise in training contracts in smaller firms since 1999, compared to 27 per cent in larger firms (Source: Analysis from the Law Society Annual Statistical Reports 2000-2005) .) The existence of a minimum that is now well above the statutory floor of the minimum wage (around £10,000 pa for full time employment) suggests that, at the margin, some smaller or less prosperous practices (for example those specialising in legal aid work) might be deterred from taking on trainees on cost grounds.

Surveys of other professions suggest that the setting of a minimum salary for trainees is not widespread, yet this does not appear to have resulted in concerns about the quality of the training environment or about exploitation of trainees. 

The LSRB and the Minimum Salary

Regulation of the training contract period is now the responsibility of the board. One of the board’s strategic objectives is to ’set, promote and secure, in the public interest, standards of behaviour and professional performance necessary to ensure that clients receive a good service and that the rule of law is upheld’.

To achieve this, the board will ensure that those entering the profession:

• Come from a wide range of backgrounds and experience
• Meet appropriate standards of character, intellect, knowledge and skills
• Are able to sustain client confidence
• Understand and are able to sustain commitment to the rule of law
• Can demonstrably uphold the principles governing those providing legal services: independence; integrity; the duty to act in the best interests of clients and client confidentiality

In this context, the board is looking afresh at its role as regulator in setting a minimum salary for trainee solicitors.

The board will need to consider the extent to which any regulation of the employment terms agreed between trainees and their employer, including the level of remuneration, contribute to or detract from the achievement of these objectives.

Would client confidence be reduced, for example, by the removal of a requirement to pay a minimum salary?

Would trainees be less competent if the requirement was removed?

Would access to the profession for trainees from a wide range of backgrounds and experiences be restricted?

In considering these questions, the board is mindful of the fact that, since the minimum salary was introduced in 1982, minimum wage legislation has been introduced in the UK. This provides a measure of protection for trainees regardless of any regulatory intervention.

The board has also issued a separate consultation which proposes a new approach for the regulation and assessment of the period of trainees’ work based learning. The proposals focus on a desire to remove any unnecessary regulation of the period of work based learning and in the relationship between firms and trainees. A new route to qualification for individuals who have not entered into formal training agreements with their employee, and therefore are not subject to the minimum salary requirements, is also proposed.  Please see the Training Framework Review pages for information on this consultation, and the TSG's view.

The board has increased the minimum salary for 2006 in line with recent practice. However, before it takes a decision on whether to retain the requirement for 2007, it is seeking views on whether a minimum salary for trainees should be retained and whether the removal of the requirement would either contribute or act as a barrier to achievement of its key strategic objective of securing standards in the public interest.