Regulators in the professional and financial services sectors have renewed their focus on the culture of the firms they regulate.  Regulators are by no means limited in their outlook to simply matters of client protection and ensuring that advice and representation meet reasonable standards of quality. 

For example, the Solicitors Regulation Authority (SRA) has recently released new guidance for regulated and non-regulated law firms on looking after staff wellbeing in the workplace. The guidance follows a thematic review in which the SRA examined how law firms can support employees in the face of long hours, heavy workloads and clients with high (and occasionally unrealistic) expectations.   

Using the SRA guidance as an example, we look at the interplay between professional services firms and their regulators over the regulation of workplace wellbeing. In particular we cover:

  1. Why is wellbeing any business of our regulator?
  2. What should regulators know about?
  3. What can be done – top tips for professional services firms

1. Why is wellbeing any business of our regulator?

Running a professional practice of any size is a demanding job. Partners at the top of a busy firm will often find themselves pulled in all directions, juggling their various responsibilities towards clients, fellow partners, professional networks, employees, trainees, advisers, intermediaries and others. 

A failure to balance these competing interests can lead to a negative workplace culture.  A quarter of respondents to the SRA’s review felt that their firm did not have a positive culture, due to concerns around long hours, workloads, targets, mental health and bullying. 

Critics of the pro-active approach might argue that regulators should focus their attentions on ensuring clients are given a quality service and should accept the reality of law and accountancy firms as high-pressure environments. They may also suggest the SRA, ICAEW and others should steer clear of matters of employment law or operational efficiency. 

However, there are many potential casualties which may arise from a negative workplace culture, including: 

  • mistakes by staff under pressure and poor outcomes for clients;
  • serious ethical issues arising from advisers under pressure to cover up problems, which is a common theme in many disciplinary cases, particularly in the legal sector;
  • high recruitment costs arising from staff turnover;
  • employment and personal injury claims from overworked and underappreciated professionals and support staff; and
  • difficulties in securing professional indemnity renewals, especially as underwriters are asking questions about a firm’s culture, acknowledging that a positive workplace can mean fewer claims.

2. What should regulators know about?

There is a trend towards a wider remit for regulators, beyond client protection ensuring adequate service standards, and into how their internal business is conducted and the private lives of their partners and staff. 

The latest annual report from the Solicitors Disciplinary Tribunal, for example, has warned that sexual misconduct and offensive social media posts are matters which have “come under the microscope” in recent years, with other areas outside of practice also likely to come under scrutiny.  

However, the courts recognise there is a limit.  For example, the High Court’s judgment in the recent case of Beckwith v SRA case shows that the need to uphold public trust in a profession is not without limit:

It is one thing to accept that any person who exercises a profession may need, for the purposes of the proper regulation of that profession in the public interest, to permit some scrutiny of his private affairs; to suggest that any or all aspects of that person’s private life must be subject to regulatory scrutiny is something of an entirely different order.  

In the legal services sector, the SRA has emphasised that firms are not required to report every single potential concern or suspected misconduct if based on mere “gossip or suspicion”.  However, it expects firms (and particularly their compliance officers) to exercise their own judgment in deciding whether the issues warrant a report. 

If there are serious issues arising from a poor workplace culture, such as discrimination, bullying and harassment, then a report to the regulator will be required, even if there is no direct impact on client service. 

Regulated professional firms will therefore need to balance the employment rights of an employee who may be the subject of a report to the regulator: a “knee-jerk” report on the basis of un-investigated rumour may well be a breach of trust and confidence leading to a constructive dismissal. Guidance on reporting and notification obligations will help firms understand what needs to be reported and when. 

3. What can be done – top tips for professional services firms

What can professional firms do to encourage a positive workplace environment and avoid the risks associated with heavy workloads and high client demand?  From our experience, firms would do well to consider these questions and options for dealing with them:

  • Are you providing adequate support and supervision for your employees?  Many partners will be highly responsive to client requests at all hours of the day but may not always be so willing to supervise a more junior team member and provide the necessary support on their matters. Effective delegation will ensure that junior practitioners know when and how to seek partner input.    
  • Are your policies and procedures fit for purpose? Firms should ensure they provide a process for employees to raise concerns about bullying, harassment, compliance failures, discrimination, unreasonable client expectations or other problems.  The process should allow concerns to be addressed promptly and constructively.  Other important policies, such as IT and social media, should be frequently reviewed and updated where necessary. 
  • Do you provide opportunities for staff to give honest and open feedback? Consider using surveys, consultations or focus groups to understand how staff can better be supported and to float new policies and practices to ensure maximum buy-in.  “360” feedback on partners and senior management may help with drawing attention to important issues which junior employees may otherwise be unwilling to raise.  Exit interviews are another means of collecting feedback which may be more frank and to the point than the views expressed by continuing employees.        
  • Are your values followed? Consider whether all members of staff are empowered to live up to the firm’s values and whether appraisals should require partners and employees should demonstrate their promotion of those values.  It is one thing to have a set of values written down, but a high-pressure workplace culture and expectations around billable hours or other performance targets might undermine these values.   
  • Are your junior employees willing to own up to mistakes? Advisers of all levels of skill and experience will make the occasional mistake, especially when they are overworked and not adequately supervised.  A negative workplace culture will incentivise trainees and associates to keep quiet about – or even try to cover up – missed deadlines, wrong advice or other problems.  In the legal sector, countless Solicitors Disciplinary Tribunal cases demonstrate that the cover-up is invariably worse than the original mistake.  A culture of competitiveness, blame or vilification will discourage employees from owning up when things go wrong.  Partners can instil confidence in employees to speak up by admitting to their own mistakes in the past and ensuring that every issue is made into a learning opportunity.          
  • Do you incentivise positive outcomes aside from financial targets? One respondent to the SRA’s thematic review put it starkly: “If I must complete 7 or 7.5 chargeable hours per day, I don’t have time for a positive workplace culture, a chat at the water cooler, to support and supervise more junior colleagues or to be involved in diversity networks or social activities”.  Many firms now allow pro bono work or other projects to count towards targets.  Consider whether team-level targets might assist with improving work allocation and supervision. 
  • Do you deal with underperformance fairly and promptly? There is every temptation for partners to shy away from giving honest and open criticism after being given a substandard piece of work par: many will want to avoid confrontation and will be too busy with rectifying the work and staying on top of other matters to sit down and critique the junior’s approach.  However, providing positive feedback where it is merited will make it easier to give constructive criticism when needed.    
  • Are you helping employees to take their full annual leave entitlement? It is important to allow employees to switch off, such as by ensuring adequate holiday cover for client matters.     
  • Can you spot the warning signs of stress, burnout or other mental health problems?     We are increasingly seeing firms implement stress and mental wellbeing policies to help them comply with their health and safety duties.  Consider whether poor work or missed deadlines may be caused by unsustainable workloads and partner or client demands rather than more fundamental capability issues.  Many firms have trained up mental health first aiders to help spot stress at work issues and give proactive support. 

Contact us

If you have any questions about these issues in relation to your own organisation, please contact a member of the professional services team or speak to your usual Fox Williams contact.


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