Is Building an In-House Legal Team a Cost Saving or a Cost Add?

When Hiring an In-House Legal Team or General Counsel Makes Financial Sense

At some point in every company’s growth, someone in Finance looks at the legal bill and asks the inevitable question: “Would it be cheaper just to hire a lawyer?”

As with most things in business, the answer depends on where you are in your growth journey, how predictable your legal needs are, and how much inefficiency is hiding inside your current model. But the cost dynamics are surprisingly consistent across industries.

How Much External Counsel Really Costs

You don’t need to be a CFO to know that law firm invoices tend to spike at the worst possible times. Early on, most companies rely entirely on external lawyers because the legal workload is sporadic: a contract here, an employment query there, maybe help with a fundraising round. Annual spend might sit anywhere between £25k and £100k, which makes hiring someone internally unnecessary and financially unjustifiable.

But things start to change as the company grows. Around 50–200 employees, legal work goes from “ad hoc” to “constant.” There are commercial contracts, HR matters, privacy questions, partnership agreements, marketing sign-offs - the sort of recurring tasks that external firms are not configured to deliver cost-efficiently. It’s also the point where legal spend commonly jumps to £150k, £300k, sometimes even £500k per year.

Add in the fact that senior associates routinely charge £350–£550 per hour, and partners more still, and you quickly realise that everyday queries, which an in-house lawyer can answer in minutes, become disproportionately expensive when outsourced.

What an In-House Lawyer Actually Costs

An internal lawyer isn’t just their base salary, so companies sometimes underestimate the genuine all-in figure. Depending on level, a UK-based in-house counsel might cost £75k to £120k in salary, while senior hires and general counsels run higher. On top of that come bonuses, pension contributions, healthcare, professional insurance, and, as the function matures, tools such as e-signing platforms, contract management systems, or compliance software.

Even so, when you add it all together, a typical all-in cost for a first in-house lawyer often sits somewhere between £120k and £220k per year. That’s not nothing but it is often substantially less than the annual cost of engaging a law firm for everything.

The Hidden Time Cost Most Companies Forget to Count

One of the least visible, yet most significant, factors in this calculation is time. External law firms require coordination: clarifying scopes, answering follow-up questions, reviewing drafts, rewriting drafts, and managing project timelines. That work doesn’t fall on legal; it falls on sales teams, HR, operations, product managers, and founders or executives.

Across a fast-growing organisation, the cumulative impact can easily equate to half a full-time employee spent simply managing the external relationship. Those hours have an opportunity cost that rarely appears on the legal P&L, but that absolutely affects productivity and revenue.

In contrast, an in-house lawyer can answer a Slack message in seconds, walk over to marketing to resolve a query, update a contract template mid-afternoon, or jump on a call with a customer to unstick a deal. That speed translates directly to commercial momentum.

Predictability vs. Flexibility

External counsel offers flexibility: you only pay for what you need, when you need it. Early-stage businesses benefit enormously from this variable-cost model because legal demand is both unpredictable and low volume.

But by the time a company is operating at scale, the benefits of external flexibility are outweighed by the predictability of in-house cost. A legal salary stays roughly the same every month, whereas external bills rise and fall, often sharply, with regulatory hiccups, disputes, or transaction cycles.

Internal counsel also brings institutional knowledge. They understand the business model, the risk appetite, the negotiation patterns, the personalities, and the commercial nuances. External lawyers, no matter how good, must continually relearn this context, and bill for the time it takes to do so.

So When Does the Cost Equation Favour In-House?

While every company is different, the break point is surprisingly clear across most industries.

If your annual legal spend is approaching £150k to £250k, you are either at or very close to the threshold where hiring an in-house lawyer becomes more cost-effective. That is usually somewhere between 50 and 200 employees, depending on complexity and sector.

Past that point, companies almost always see:

• faster contract turnaround
• fewer blockages in sales and product
• a more predictable legal budget
• reduced internal time spent managing law firms
• and a meaningful drop in the volume of work sent externally

Large organisations (200+ employees) often add a paralegal to handle repeatable tasks, further reducing the need for external firms for anything except highly specialised matters.

Final Thought

At early stage, external counsel is the right choice: flexible, specialist, and financially sensible.
But as the organisation grows, legal demand grows with it and eventually, relying solely on law firms becomes the more expensive option.

Building an in-house legal team usually starts as a cost add, but it becomes a cost saving far sooner than most leadership teams expect.

If your organisation is weighing up the pros and cons, or would like help modelling what the right hiring point looks like, reach out to Daniel Tudor at JMC Legal Recruitment for expert guidance on building the right legal structure for your stage of growth.