Contributions: No change while more fundamental reform considered
There was little support for a Solicitors Regulation Authority (SRA) proposal to reapportion contributions to the compensation fund so that individual solicitors pay more than firms, it has emerged.
Just 15% of respondents to a consultation backed the suggestion that the current 50/50 split be changed to 70/30 in favour of individuals and the regulator has decided against doing it.
Since the current split was set in 2010, the number of individual solicitors has increased significantly while the number of firms has fallen.
When contributions shot up last year, the SRA was concerned about a disproportionate impact on small law firms that were least able to manage large increases – especially as Black and Asian solicitors, solicitors from lower or intermediate socio-economic backgrounds, solicitors aged 45 and upwards, and disabled solicitors were overrepresented in such firms.
The new split was an interim measure recommended in one of the consultations issued last November as part of the SRA’s consumer protection review while the SRA looked at longer-term reform of the way contributions were set.
The four possible reforms it put forward were keeping a basic flat fee but offering a discount for firms that met specific criteria that reduced risk, such as having accreditations; and basing contributions on either a firm’s risk profile, turnover, or amount of client money held.
According to newly published papers that went before the most recent meeting of the SRA board, respondents gave varied reasons for not supporting the new split.
These included the rationale and benefits for the profession as a whole not being clear, questions over the size of the benefits to small firms alongside concerns of an “unfair impact” on larger firms that paid the individual contributions for their solicitors, and the impact on individual solicitors who paid their own fee – around a quarter of the profession, according to the SRA.
The 15% who backed the change agreed that the demographic changes justified it.
The Solicitors Sole Practitioners Group felt it an improvement on the current arrangements, but its preference was for differential contributions for firms separated into three categories – individuals, small firms and large firms – and based on a combination of the amount of client money held and annual turnover.
The board agreed with the SRA’s executive to retain the 50/50 split.
The paper said: “As we are continuing to explore options for the future, we think it prudent to avoid making changes to contribution arrangements at this time, especially when we have not been able to identify appropriate changes for this year that would mitigate any disproportionate impacts on protected groups.”
The SRA last week proposed reduced contributions for 2025/26: £70 for individuals, £20 less than last year, and £1,950 from law firms that hold client money, £270 less.
Under a 70/30 split, individuals’ contributions would likely rise to £100 and firm contributions fall to £1,170.
As many firms paid their solicitors’ contributions, such a change would have a reduced or even negative impact, the SRA noted, and it would also hit those solicitors who paid their own, particularly those working in-house, where women are overrepresented.
“As the contribution amount for both individuals and firms has reduced this year, there is less urgency to make a quick change to apportionment arrangements,” the board paper concluded.
Leave a Comment