“The ‘war for talent’ in London and New York is very real, as salaries scales reach new heights, the top performing law have quickly moved to match as they view it as imperative in the tightening battle for top associate talent.”

In a seminar hosted by the ANU’s Global Institute for Women’s Leadership last Wednesday (1 June), former prime minister Julia Gillard and Workplace Gender Equality Agency director Mary Wooldridge discussed the gender pay gap.

Reporting on that gap, Ms Wooldridge argued, requires transparency from individual companies, not just at a sector level.

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Ms Gillard mused that it is reasonable to revisit Australia’s requirements around reporting.

Speaking about UK laws that require companies to publicly report gender pay gaps, Ms Gillard said: “There’s no doubt that the fact that it identifies companies so you can literally see that a business called Smith and Jones has X gender pay gap is a motivator for change.”

The conversation follows Labor’s pledge to argue for wage rises in its highly anticipated submission to the Fair Work Commission, before the 7 June deadline for its annual wage review.

The Albanese government supports a boost to the minimum wage and will be pushing to close the gender pay gap.

In the wake of such commentary and political promises, Lawyers Weekly spoke with legal recruiters about whether greater transparency around salaries for legal professionals will not only help address the gender pay gap but also help lawyers at a time in which stagnant wages are not keeping pace with rising cost of living.

The case for publication

Borrowing from the new Minister for Employment and Workplace Relations Tony Burke, Carlyle Kingswood Global director (in-house, legal and governance) Phillip Hunter said that when it comes to equal work and equal pay: “It’s that simple.

“I believe companies pay new employees the same, regardless of their gender, however, we see salaries increase at different rates for men and women over time; this needs to change.

“Law firms and corporations employing legal professionals should publish salaries and gender pay gap statistics; this should be done by a third-party.”

G2 Legal Australian director Daniel Stirling supported this, saying that the publication of company wage data, showing their gender pay gap, would be a “positive change” and would only be seen as a negative by those organisations that have a large pay gap themselves.

“This data is published in the UK, and companies and law firms with large gaps have attracted negative publicity, such as the ‘Gender Pay Gap Bot’ on Twitter (which published the pay gap of companies in response to their International Women’s Day posts supporting women). I suppose this was a way of saying ‘put your money where your mouth is,” he noted.

“There is currently a highly competitive legal employment market and candidate shortage. This type of bad press could certainly be off putting for potential employees who are considering their options.”

Lawyers in private practice and in-house currently have a myriad of opportunities to choose from, Mr Stirling reflected, and have become more discerning about potential employers considering factors such as flexibility, diversity and social impact/ESG, as well as just the salary on offer.

“A large gender pay gap could be viewed as a negative for men and women alike, given the lack of fairness associated with it. On the flip side, those employers that have successfully addressed this issue, promoted women and reduced the gap could use this as a selling point in attracting top lawyers to their organisations,” he said.

Burgess Paluch Legal Recruitment director Paul Burgess was more circumspect, noting that wage data publication is a double-edged sword.

“While publishing wage data can encourage openness it can also foster discontent,” he warned.

“In the UK, where many major firms publish data, it has led to some firms being branded as poor payers even though by other measures they may still be employers of choice. Publishing wage data alone, without also publishing billable hours, and other benefits, would paint a one-dimensional picture.”

Varying salaries across practice groups and jurisdictions

Whilst there are certainly arguments in favour of greater transparency around salaries in law, Mr Gordine said that he couldn’t see the Australian market adopting an overseas model like “lockstep compensation”.

“It would ignore the basic principles of business, especially for big law firms if each lawyer was paid the same despite their practice group, to sustain that rate, the firm would need to earn more which means clients would have to pay more,” he explained.

This said, he added, “it would be hugely advantageous to any law firm that did do it – especially at the graduate up to senior associate level – but, alternatively, law firms here should focus on announcing billable hour targets, and well as other ways associates can purpose and happiness other than compensation”.

Since the pandemic happened, Mr Gordine went on, associates have reevaluated their careers and lifestyles. “Unfortunately for most, they have never worked harder or as many absurdly long hours,” he said.

“The pay is good, but it isn’t high enough for the hours worked compared to the UK or US markets. This is where we have seen firsthand the problem arising as lawyers come to us and say if I am going to work this hard, I should do it in London or New York and get paid for it.

“It is hard to disagree.”

Australian law firms, Mr Gordine went on, traditionally have enough talent returning from overseas to bolster their ranks, “but we haven’t seen as many returnees in 2021 and 2022, combine that with the mass exodus of talent to New York and London and we have seen a real war for talent on our shores for the first time”.

“Salaries have been used here to attract talent from certain practice groups such as corporate, banking and construction but not across the industry as a whole and we certainly haven’t seen firms publicly announce their paying rates,” he said.

Factoring in the (supposed) Great Resignation

The entire conversation, Mr Hunter pointed out, needs to be had in the context of where the market is currently at.

Salaries in the legal sector have seen a huge increase over the last two years, he espoused, “far beyond the average 2.4 per cent, to keep their staff from leaving”.

“Companies recognise there is a shortage of talent, and this isn’t going to change any time soon,” he advised.

“Companies are finding it difficult to match/compete with artificially inflated salaries and candidates believe this is the new normal, and counteroffers are becoming more and more common, further adding to salary growth.”

Mr Burgess, for his part, has long said that there would be no Great Resignation in Australia.

What the market does have, he said, is a “massive shortage” of local talent, as per Mr Gordine’s point.

“While publishing data might assist some firms attract lateral hires, the reality is that in a market which is short of lawyers in key transactional areas many lateral moves are being achieved at above market rates. They also occur largely beyond the levels covered by published wage data,” he outlined.

“For example, the UK firms tend to publish wage data for traineeships and the first three years post-admission only, whereas the demand spike in Australia is at the 3-7 PQE levels. Beyond three years PQE, we see a lot of variation in salaries within firms based on areas of practice, market demand and individual performance.”

Shift in recruitment mindset

When asked if – from the perspective of a recruiter – law firms that publish wage data will be seen as employers of choice, Mr Burgess said that for those that pay well, the answer is that it would “definitely assist”, but that it is not the full picture.

“UK rankings for the best firms to work at often have many second-tier paying employers rating very highly, when the budgets, culture and benefits are taken into consideration. Flexibility, training, brand, quality of work and culture rate as significant features for our junior lawyers in their decision making, often overshadowing pure salary,” he listed.

Because of this, and more broadly, recruiters in law are in the midst of a shift in corporate mindset, Mr Hunter proclaimed.

The imbalance between supply and demand is, at present, “significantly broader” than it has been in the past.

“There is a shift towards having to re-engineer position descriptions as candidate salary expectations are exceeding budgets. The wage inflation pressure is there and will become more obvious over the next 3-6 months, all things being equal. Clients are indicating that they have some flexibility around budget which was not the case previously,” he said.

“A pertinent question for a recruiter to ask when hiring is, ‘Are you hiring for a direct replacement, or for a person that can grow into the role?’ Looking for an individual who the employer has to invest in may be a better fit from a financial perspective but may come at the cost of intellectual property and experience.”