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Upcoming longer training contracts could hurt law firms’ bottom lines

Upcoming longer training contracts could hurt law firms’ bottom lines

Source: Business Times
Article Date: 04 May 2023
Author: Renald Yeo & Chong Xin Wei

From 2024, the required practice training period before law graduates can be considered for admission to the Bar will double to 12 months.

Singapore's law firms could end up earning less from clients while paying more for trainees, once a longer training period for law graduates kicks in from 2024.

Currently, graduates must complete a six-month training contract at a local law firm before they can be considered for admission to the Bar, which then allows them to practise. But from 2024, the required practice training period will double to 12 months.

This could mean a loss of revenue for firms, said K Anparasan, managing director of boutique law firm WhiteFern. “Firms are generally not able to charge clients for their trainees’ learning while they work on client files.”

At the same time, the cost of having a trainee will rise – not just due to the longer duration, but also because firms may raise their training allowances.

Julian Tay, senior partner at Lee & Lee, said: “It will take longer for a practice trainee to become a practising lawyer, which in turn increases the costs of training the practice trainee.”

Noting that trainee lawyers will face a delay before they can earn the salary of an associate or new lawyer, Anparasan said: “Firms are also mindful of this financial impact experienced by trainee lawyers, and will likely consider the appropriate remuneration.”

For TSMP Law Corporation, the longer duration justifies a higher allowance. Said joint managing partner Stefanie Yuen Thio: “We have increased our training allowance for future years, in recognition that a practice trainee with more experience will be able to contribute more effectively to the work they’re doing.”

“However, I can imagine that the small firms with lower-margin work may struggle with increased costs,” she added.

Trainee allowances typically range from S$1,000 to S$2,500 per month, as indicated by public listings on the Law Society of Singapore’s (LawSoc) website.

Another worry is that firms “may actually take fewer trainees since we would be expected to take each one for twice as long”, said Derek Kang, managing director of Cairnhill Law.

But of the eight firms – of varying sizes – to which The Business Times spoke, most expect trainee intake figures in 2024 to be consistent with previous years.

Separately, other challenges might be posed by a new requirement for trainees to rotate between practice areas during their 12-month training period.

From 2024, a practice trainee must be rotated through an advocate-seat, which deals with dispute resolution and contentious work, and a solicitor-seat, for advisory, corporate or transactional matters. They must spend at least three months in the secondary area.

Yet even before graduation, most law students would have undertaken internships to explore and eliminate areas of practice, said Andrea Chee, director of AEI Legal.

For those who have already decided against one type of practice, “the benefits of the exposure afforded by the secondary seat may be outweighed by the disruption in training for his or her chosen field”, she added.

Smaller or boutique firms which specialise in a single practice area may also find it hard to meet the rotation requirement, said WhiteFern’s Anparasan.

Profession ‘becoming increasingly complex’

For firms that eventually hire their trainees, however, the longer training period does not necessarily raise costs. Essentially, for the extra six months, trainees continue to draw an allowance instead of the salary they would have been paid after being admitted to the Bar.

That is why Rajah & Tann does not expect overall manpower costs to increase with the longer training period, said regional marketing and communications director Vionne Tu. “We take on trainees with the long-term view of offering them associate positions with the firm if they do well.”

Noting a possible shortage of lawyers joining the industry, LawSoc president Adrian Tan said: “A section of the legal profession feels that the sooner we are able to train and qualify more lawyers, the better we will be able to serve the growing needs of Singaporeans.”

Yet the profession is becoming increasingly complex, he added. “A longer training period may be justified because the aspiring lawyer has so much ground to cover nowadays.

“Today’s trainee has to learn about three or four times more material than the trainee lawyer of 30 years ago,” said Tan, who is also a partner at TSMP.

With a longer training period, law firms will be able to provide more robust training programmes, and gain more time to determine if trainees are suitable for retention, said Lee Ee Yang, managing director of Covenant Chambers.

Another benefit of the lengthened training period is that it provides trainees with “an opportunity to possibly work on litigation cases that move to trial or see a transactional deal through to completion”, said Shashi Nathan, a partner at Withersworldwide.

“Additionally, it’s worth bearing in mind that a longer training contract for trainees is the norm in international markets including those where Withersworldwide operates,” he added.

Chee concurred: “A 12-month practice training period brings Singapore closer to the practice in other global legal hubs, such as the UK, Germany and Hong Kong, where the training period is two years.”

Said LawSoc’s Tan: “Firms of all sizes will have to reorganise their training systems to accommodate the longer training duration. This is inevitable.”

Source: Business Times © SPH Media Limited. Permission required for reproduction.


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