Retention and Compensation in the Legal Sector

What you'll learn in this blog:

• Trends around legal employees: there’s a lot of change in the sector, from the growing role of AI to the impact of the economic climate
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• ‍Turnover is high in the legal sector: 25% of associates planned to change jobs in the next year, and 80% leave within five years of joining a firm
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• HR teams are under pressure: employee frustrations over pay and progression opportunities are compounded by a competitive job market
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• ‍Pay decisions need better data: to tackle attrition challenges, law firms need to make data-led decisions about their compensation reviews

3 trends in the Legal Sector to be aware of:

1. Progress with the gender pay gap

In 2024 the gender pay gap reduced to 4.3% among general counsel, showing an increased prioritisation of pay equity - one that employees will be tuned into, and organisations should be conscious of.

2. Growing importance of tech

AI has an increasingly important role in day-to-day legal tasks, so employees who are tech savvy and legally trained are under increased demand - meaning firms will have to compete to attract and retain their talent.

3. Cost-of-living changing behaviours

Despite the long-standing trend for turnover continuing, the challenging economic environment has made some legal professionals more cautious about changing jobs - just 9% of in-house counsel did so in 2023.

What drives employee turnover in the Legal Sector? 

Regardless of recent dips in attrition within certain areas, employee turnover remains a challenge for HR and Operations in the Legal Sector. But why is this? It’s an industry, as we said, known for its high salaries, and the accompanying high intensity workload is no secret. But there are some potential drivers of turnover to be aware of:
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• New generations, new priorities: it may read like a cliched gripe of the ‘old guard’, but there’s truth to it: Millennial and Gen Z employees care much more about things like a sense of purpose, inclusive workplaces, and work-life balance. And this is in addition to high salaries, so firms need to be competing on multiple fronts.

• Flexible work in the mainstream: the pandemic caused a seismic shift in terms of expectations around working patterns, and legal professionals aren’t immune. There’s an increased demand for flexibility, partly for the sake of reducing stress, and firms are listening: one survey found that 56% introduced wellness programmes and 33% reduced billable hours requirements.

• Ambitious juniors who can’t wait: for many junior legal professionals, there’s a lack of opportunities when it comes to career progression - and in a sector so focused on advancement and the associated rewards that brings (not to mention the pay-off for all that hard work), that’s not ideal. Juniors will jump ship if they have to.
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There’s a multitude of factors that HR and Operations teams need to be aware of - ones complex and multifaceted - but it’s still key to keep an eye on compensation itself. Money matters in this sector, and while some of the more difficult elements of the job might be mitigated, it’s always going to be a demanding profession.

Strategies for retention in Law: compensation & beyond

If you’re focused on talent retention, then focus on both compensation and other efforts beyond this. In combination, you can build a competitive advantage over the scores of other firms vying for your top talent…
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Compensation strategies:

• Make sure pay itself is competitive. Only 48% of in-house legal professionals were satisfied with pay when asked
• Consider specialised pay packages for those with particular in-demand skills, like digital forensics or other tech abilities
• Keep a close eye on market shifts and industry developments so you’re confident you’re matching benchmarks
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Other programs & perks:

• Think about opportunities to promote wellness - through a more flexible workplace policy, perhaps - to appeal to new generations
• Reignite your focus on DEI initiatives, in terms of pay equity and beyond - as employees notice (and care about) this
• Find opportunities to offer career and training opportunities where possible, to show there is space to grow
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The role of salary benchmarks in retention & compensation

Your retention strategy and/or compensation review share a common need: reliable, relevant, up-to-date pay data for the industry. You need access to salary benchmarks that are specific to the Legal Sector, that account for the differences in roles, that factor in location, that consider organisation size… because all of these factors impact the salaries your employees expect.
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This means you can make data-driven decisions both reactively and proactively. Reactively, in the sense that you can respond to market shifts. And proactively, in that you can work through your pay review process methodically and easily. 

Introducing Compensation IQ: pay reviews made easier