How Law Firms Can Navigate the NI Changes

The recent adjustments to National Insurance Contributions (NICs) have sparked concern across various industries, including legal practices. These changes, set to take effect from 6 April 2025, will see employer NICs increase from 13.8% to 15%, alongside a reduction in the threshold from £9,100 to £5,000. For law firms, these shifts will significantly impact operational costs, making it crucial to explore cost-saving strategies that maintain efficiency without compromising service quality.

Adapting to Rising NICs: Strategies for Legal Practices

With clients demanding more value for their money, law firms must look beyond simply increasing fees. Instead, adopting innovative business models and outsourcing key functions can help mitigate rising costs.

Transitioning to a Self-Employed Model

A growing number of legal practices are moving towards a self-employed or "dispersed" firm model. This structure allows law firms to engage self-employed lawyers rather than salaried employees, offering numerous benefits:

Cost Reduction: Firms reduce salary-related expenses, including NICs and employee benefits, leading to a leaner cost structure.
Operational Flexibility: Self-employed lawyers manage their workloads independently, allowing firms to scale operations efficiently without the burden of fixed employment contracts.
Talent Attraction: Experienced legal professionals increasingly prefer autonomy, making this model more appealing to skilled practitioners.

Successful examples of this approach include Keystone Law and Scott-Moncrieff, both of which provide infrastructure and support to self-employed lawyers while minimising overhead costs. These firms benefit from a shared resource model that ensures access to administrative support, compliance services, and branding, without the financial strain of full-time employment.

Outsourcing: A Smart Cost-Saving Solution for Law Firms

Another effective way to manage increased NICs is through outsourcing. Many law firms are streamlining their operations by outsourcing non-core functions, such as payroll, IT support, legal transcription and marketing. This strategy offers several advantages:

Reduced Overheads: Eliminating in-house support roles helps reduce employment-related costs.
Enhanced Efficiency: Outsourcing providers bring specialised expertise and technology, ensuring high-quality service delivery.
Scalability: Firms can easily adjust outsourced services according to workload fluctuations, making them more agile and adaptable.

The Role of Legal Transcription in Cost Savings & Productivity

Among the various outsourcing opportunities, legal transcription stands out as a game-changer for law firms looking to cut costs while boosting efficiency. By outsourcing legal typing tasks, firms can maximise billable hours and improve workflow.

Fee Earners: Typing vs. Dictation & Transcription

Why is Dictation More Efficient?

Most professionals speak significantly faster than they type. While the average typing speed is 38-40 words per minute (wpm), even a slow dictation speed of 140-160 wpm is nearly four times faster. This translates into substantial time savings:

A fee earner who spends two hours a day typing could reclaim 1.5 hours of billable time.
At a charge-out rate of £300 per hour, that equates to £450 lost per day, or a staggering £96,000 annually.

Example: Copy Typing

A 10,000-word document typed at 40 wpm would take over four hours, costing £1,250 in lost chargeable time (assuming a £300 hourly rate). A professional typist from OutSec Legal, however, can complete the same task in just under 2.5 hours, at a fraction of the cost (£64.35 + VAT). This represents a potential saving of over £1,172 per document.

Future-Proofing Law Firms: The Way Forward

As NIC increases take effect, law firms must proactively adapt to avoid financial strain. Transitioning to a self-employed model, outsourcing non-core functions, and leveraging transcription services can significantly enhance operational efficiency and profitability.

Firms that embrace these strategies will not only mitigate rising costs but also gain a competitive edge in an evolving legal market. By optimising resources, improving fee earner productivity, and reducing overhead expenses, legal practices can continue to deliver exceptional services while maintaining financial health.

About OutSec Legal

At Outsec Legal, our services are designed to support legal professionals by providing reliable and high-quality legal transcription, allowing your practice to focus on clients and fee production. Whether your practice needs help with day-to-day transcription or support during busy periods, our pay-as-you-go option enables legal practices of all shapes and sizes to access support as and when they need it.

So What Are The Benefits?

Sole Practitioners/Barristers/Small Law Practices:

OutSec Legal is the perfect solution for sole practitioners, small law firms or barristers who need typing assistance on a pay-as-you-go basis, as it provides a cheaper alternative to employment.

Medium to Large Law Practices:

Medium to large law firms use OutSec Legal to:

Reduce secretarial staff (completely or partially). This reduces the need for expensive office space (or enables space to be utilised for more productive use/fee generation);
Allow fee earners to concentrate on chargeable hour targets, rather than typing emails or amending documents;
Provide an effective solution to enable your fee-earning staff to work remotely. Therefore providing further opportunities to reduce expensive office space or increase your fee earner headcount with less space. It enables flexible working and makes law firms more agile;
Provide a business continuity solution to enable law firms to access secretarial staff in times of absence.
Enable firms to upscale support as the firm grows or at times of high workloads, without the need for employing additional staff.