The question usually comes up during annual planning. The number of contracts has increased, two disputes have taken more time than budgeted, and someone suggests advertising an in-house legal position. The discussion then quickly turns to salary, and that is exactly where it loses touch with the real question: Which model covers the company’s needs most reliably?
Three options are available: the individual engagement, an in-house position with a Syndikusrechtsanwalt (licensed in-house attorney), and the external legal department. They differ not only in price but in four points that carry far more weight in day-to-day business: response time, cost structure, breadth of expertise and controllability. On top of that come the professional-law limits on in-house attorneys, which almost never appear in the calculation.
clience.legal is a digital business law firm for entrepreneurs. We work for many clients as external legal department of clience.legal and know the transitions between the models from practice, including where an in-house position is the better choice. This article compares the three options and gives a recommendation for each company size.
The most important information at a glance
- Four comparison criteria: Response time, cost structure, breadth of expertise and controllability matter more in day-to-day business than the hourly rate.
- Individual engagement: inexpensive for rare one-off issues, but without a preventive effect and with familiarization effort in every case.
- In-house position: closest proximity to the company, but full costs in the six-figure range, risk of absence and limited breadth of expertise.
- External legal department: continuity without fixed costs, several areas of law, predictable billing, but only effective if involved early.
- Observe professional-law limits: The in-house attorney (Syndikusrechtsanwalt) may not represent their own company before certain courts and has no right to refuse to testify in criminal proceedings.
- In practice, setups are mixed: Beyond a certain size, the combination of internal coordination and external depth of expertise is the most stable setup.
The three models in brief
With an individual engagement, you instruct a law firm on a case-by-case basis. Billing is by hourly rate or under the Lawyers’ Remuneration Act (RVG), in each case based on the specific matter. The collaboration ends once the matter is completed.
The Syndikusrechtsanwalt is a fully qualified lawyer employed by you with a special admission under § 46a BRAO (Federal Lawyers’ Act). They work exclusively for their employer and are integrated into its organization. What mainly distinguishes them from an in-house lawyer without admission is their treatment under social security law and the professional-law framework.
The external legal department is a law firm that takes over your ongoing legal needs on a permanent basis. Billing is via a monthly flat fee, a call-off contingent of hours or fixed prices for defined projects. The firm knows your contract landscape and is involved before decisions are made. The options we offer for this are shown in our pricing models at a glance.
Why the salary question is misleading
In most discussions, the salary for a possible position is set against the previous year’s legal fee invoices. This calculation overlooks three items that shift the comparison.
First, internal time is missing. As long as there is no legal function, management and specialist departments handle contract work on the side. These hours do not appear in any cost center, but they are the most expensive in the company because they are lost elsewhere.
Second, the damages item is missing. Anyone who reviews the past three years usually finds one or two cases caused by an agreement that was not reviewed. These amounts belong on the comparison side, because earlier involvement could have avoided them.
Third, the delay effect is missing. If a framework agreement sits for two weeks because no one can review it, the project start is postponed and with it the receipt of payment. For larger contracts, this effect clearly exceeds the pure advisory costs.
Comparison based on four criteria
Response time and availability
The in-house attorney is the quickest to reach, as long as they are there. In the event of vacation, illness or resignation, the entire legal department is out, and refilling the position takes several months on the market. With an individual engagement, the response time depends on the firm’s workload and is rarely guaranteed. The external legal department lies in between, but with one advantage: response times and an escalation path can be agreed contractually, and deputization is arranged.
More important than absolute speed is familiarization time. Anyone who has to explain the facts anew with every call loses more time than a response that takes one day longer would cost.
Cost structure
An individual engagement causes variable costs without a base load, but also without predictability. When several matters run in parallel, peaks arise that are not reflected in the budget.
An in-house position means fixed costs. The gross annual salary of a Syndikusrechtsanwalt is roughly between 70,000 and 90,000 euros, depending on experience and region. On top of that come employer social security contributions, workplace costs, legal databases, continuing education and recruitment costs. Realistically, the full costs are therefore in the six-figure range, regardless of how much work actually arises.
The external legal department is a hybrid: a predictable base load combined with variable coverage of peaks. What matters for the comparison is the full cost, not the hourly rate. A high hourly rate for a small number of hours is cheaper than a position budgeted at a low rate that has to be paid permanently. It also helps to assess when a contract review by an attorney is worthwhile in an individual case.
Breadth of expertise
This is where the clearest difference lies. A single person can cover two to three areas of law with real confidence. The typical needs of a medium-sized company, however, include contract law, corporate law, labor law, data protection, intellectual property and, depending on the industry, regulatory issues. The in-house attorney will close the gaps through external engagements, which does not replace the costs of the in-house position but adds to them.
The external legal department draws on several areas of law and brings in further colleagues for specialist questions as needed. With individual engagements, the same breadth only arises if you manage several law firms in parallel, which shifts the coordination effort back into the company. We describe the scope of our work under business law advice.
A side effect of breadth of expertise concerns the quality of the assessment. Anyone who sees many comparable cases can better judge what is customary in the market and where a demand by the other side is excessive. In a law firm, this experience builds up over many engagements; in a single in-house function, only through its own matters. This benchmark is particularly valuable in negotiations, because it answers the question of whether a clause is truly unusual or merely unpleasant.
Controllability and proximity to the company
The in-house attorney knows the people, the processes and the unwritten rules. This proximity is a real advantage, but it has a downside: anyone who is part of the organization comes under pressure more easily to deliver a result rather than an assessment. An external law firm can voice an uncomfortable assessment more easily because it is not part of the reporting line.
Conversely, the external solution needs to be integrated. Without fixed appointments, designated contacts and clear authorization to submit requests, it remains unused. Controllability is therefore not better or worse, but organized differently.
What the calculation usually misses: professional rules
The Syndikusrechtsanwalt is subject to restrictions that many companies only notice when it matters. Three of them are essential for the decision.
- Prohibition on representation: Under § 46c(2) sentence 1 BRAO, the Syndikusrechtsanwalt may not represent their employer in civil proceedings with mandatory legal representation before the Regional Courts, the Higher Regional Courts and the Federal Court of Justice (BGH), or before the Higher Labor Courts and the Federal Labor Court.
- Prohibition on acting as defense counsel: They may not act as defense counsel or representative in criminal or administrative fine proceedings against the employer or its employees.
- Restricted right to refuse to testify: In criminal proceedings, they have no right to refuse to testify under § 53 StPO regarding information obtained through their work for the employer. In civil proceedings, such a right exists under § 383(1) no. 6 ZPO.
In practice, this means that precisely in the situations with the highest risk, i.e. in litigation and official investigations, you need external attorneys anyway. Anyone who budgets for an in-house position expecting it to cover all cases is miscalculating. For matters of Compliance and managing director liability this point is particularly relevant, because internal investigations and their documentation may have to be handed over if it comes to it.
The setup that we most often see in practice
Between the models lies an intermediate stage that is rarely described but often chosen. One person in the company takes on coordination: they keep the contract overview, monitor deadlines, bundle requests from the departments and prepare the facts. This person does not need to be a fully qualified lawyer; often it is someone from commercial management or an assistant role.
Legal assessment, contract drafting and representation come from outside. The advantage lies in the interplay: internal coordination ensures that issues are identified in the first place and passed on in good time, while the external side contributes breadth of expertise and the ability to act under professional rules.
This setup costs a fraction of an in-house position and solves the basic problem of most medium-sized businesses: legal issues do not go wrong for lack of advice, but because they land on the table too late.
Recommendation based on company size
- Up to about 20 employees: Individual engagement, supplemented by a one-time review and organization of the contractual basics. Ongoing needs are usually too low for a flat fee, but the foundation should be in place.
- Approximately 20 to 100 employees: External legal department. Recurring issues arise in this phase, while an in-house position would not yet be fully utilized. The preventive effect is greatest here.
- Approximately 100 to 500 employees: Combination. One in-house person handles coordination, deadlines and standard matters; in-depth expertise and representation in court come from outside.
- From about 500 employees: In-house legal department with several people, supplemented by external specialists. At this size, the workload justifies the fixed costs.
These thresholds are guidelines, not rules. A company with forty employees and international sales has more legal needs than a business with three hundred employees and few standard contracts. The decisive factors are contract density, regulation and pace of change. We have described typical constellations under Advantages of an external legal department for medium-sized companies .
What changes when you switch models
Switching models is not just a procurement decision; it changes processes. Anyone who moves from individual engagements to ongoing support must determine who will be allowed to submit requests in the future. Without this rule, either bottlenecks arise because everything goes through management, or costs get out of control because each department instructs the firm on its own. A small group of authorized persons with clear subject boundaries has proven effective.
In the reverse case, i.e. filling an in-house position, people often underestimate how much support the new function needs at the outset. Contract portfolios must be handed over, histories explained and responsibilities redrawn. The first months tie up management time before relief kicks in.
The same principle applies in both directions: the benefit does not come from the model but from early involvement. An excellently staffed setup that is only informed after the contract is signed achieves less than a lean solution that is consulted beforehand.
Five questions before the decision
- How many hours of legal work actually arise per year, including the time spent by management and specialist departments?
- Which legal areas are covered by this, and how many of them could a single person safely cover?
- How often was representation in court necessary in the past three years?
- What happens in the company when the person responsible is absent for three months?
- Are legal questions currently asked before the decision or after it?
The last question is the most meaningful. Where legal issues only emerge after the signature has been given, the potential savings lie not in the price of the advice but in its timing.
Anyone who answers these five questions in writing usually already has the decision-making basis in hand. In many cases, it turns out that the problem isn’t the model itself, but a lack of overview of what is actually involved. Creating this overview takes a few hours and is worth it regardless of which path is ultimately chosen.
Related: External legal department: when it pays off.
Tell us your company size, your typical contract types and the number of disputes in the past three years. We will tell you frankly which model suits your needs, even if the result argues against ongoing support. To do so, book a free initial consultation of 15 to 20 minutes. We describe what the collaboration looks like in practice under more than just legal advice, and the contract work itself under Drafting of contracts and T&Cs.
FAQs
What is the difference between a Syndikusrechtsanwalt (licensed in-house attorney) and a company lawyer?
Both are employed by a company. The Syndikusrechtsanwalt additionally holds an admission under § 46a BRAO (Federal Lawyers’ Act), which requires professionally independent work on their own responsibility. One practical consequence, among others, is the possibility of being exempted from the statutory pension insurance and continuing to pay into the lawyers’ pension fund. For the employer, little changes in the scope of services, but the professional-law framework does.
May a Syndikusrechtsanwalt represent my company in court?
Only to a limited extent. Under § 46c(2) sentence 1 BRAO, representation in civil proceedings with mandatory legal representation before the Regional Courts, the Higher Regional Courts and the Federal Court of Justice (BGH), as well as before the Higher Labor Courts and the Federal Labor Court, is excluded. They may also not act as defense counsel in criminal or administrative fine proceedings against the employer. You need external attorneys for these proceedings.
Does a Syndikusrechtsanwalt have a right to refuse to testify?
In civil proceedings, there is a right to refuse to testify under § 383(1) no. 6 ZPO. In criminal proceedings, however, the attorney’s right to refuse to testify under § 53 StPO does not apply to information obtained through their work for the employer. This is of practical importance for internal investigations and their documentation, because documents may have to be handed over under certain circumstances. Anyone who needs this protection should involve external attorneys.
Is an external legal department cheaper than an in-house position?
In most constellations involving medium-sized companies, yes, because there are no fixed costs and only the actual need is paid for. What matters is the full cost: on top of a gross salary of roughly 70,000 to 90,000 euros come employer contributions, workplace, databases and training. With high and steady demand, the calculation reverses; then the workload justifies the position.
Can I combine both models?
Yes, and beyond a certain size, this is the most stable setup. One in-house person handles coordination, deadlines and standard matters, while in-depth expertise, specialist areas and representation in court come from outside. A clear division of tasks is important so that responsibilities and deadlines remain unambiguous. Without this demarcation, duplicated work and gaps arise at the same time.
How quickly does an external legal department react?
This belongs in the agreement, not in a verbal promise. A response within one working day is customary, with a defined escalation path and direct availability for urgent cases. Also check who takes over in case of vacation or illness. In any case, the practical time saving comes less from speed than from the fact that no familiarization is needed.
When is an individual engagement sufficient?
For rare, clearly defined issues and in small businesses without their own contracts and without staff. It is also the leaner solution for one-off projects such as a corporate conversion or a single lawsuit. As soon as several matters regularly run in parallel, the calculation tips, because familiarization effort and the lack of prevention become more expensive than ongoing support.
Which legal areas can a single person cover?
Two to three areas at a reliable level is realistic. The typical needs of a medium-sized company, by contrast, include contract, corporate and labor law, data protection, intellectual property and, depending on the industry, regulatory issues. In practice, the gaps are closed through external engagements. These additional costs belong in the calculation for an in-house position.
How long does the transition to an external legal department take?
The start begins with an inventory of contracts, terms and open disputes and an agreed list of priorities. The most urgent points are dealt with in the first weeks; after that, the collaboration moves into fixed routines. Depending on the scope, this initial phase takes a few weeks to a few months. The effort then drops significantly because the foundations are in place.
When is it worth consulting an attorney on the choice of model itself?
As soon as a position is to be advertised or a flat fee agreed, a brief review of the starting situation pays off. We assess the actual need based on your contract density, your disputes and your growth plans, and tell you which model works. The conversation costs you nothing and, if in doubt, prevents a wrong decision that ties up fixed costs for years.
