The annual report by Mahlab, the specialists in legal search, shows that salaries have risen across the board,  with the largest average increases of 20% and above since 2019 occurring in major firms in Brisbane and  Melbourne and among corporate roles in Melbourne. 

NSW salaries remain the highest, reflecting the business activity and demand for lawyers within the state.  Other states have come more closely in line with Sydney salaries. 

Mahlab Managing Directors Katherine Sampson and Lisa Gazis cite a longstanding insufficient supply of  lawyers to fill law firm and corporate demands, as well as the recent exodus of lawyers from the Australian  profession to overseas jurisdictions, a re-evaluation of personal priorities, and illness-related absences as the  main causes of the talent drought. 

“Lawyers are now free to leave Australia for a stint in London and New York, as is common in the profession.  But at the same time, those who left pre-COVID are not returning because they missed out on the full  experience of living abroad due to the pandemic restrictions. This is exacerbating the talent shortage,” Ms  Sampson and Ms Gazis said. 

“Then there are people for whom COVID has prompted them to re-assess their values. Many individuals in  private practice are saying ‘this is not the lifestyle I want’ and they’re looking for reduced hours in part-time  opportunities or they are dropping out of the legal workforce entirely.  

“Similarly, more people, particularly lawyers considering an in-house move, are interested in aligning  themselves with an employer that makes a positive social impact, whether that be inherent in their business  operations such as an NFP or healthcare provider, or through their approach to environmental, social and  corporate governance,” they said. 

“Finally, we’re seeing an already stretched workforce experiencing more pressure from illness-related  absences. People are not available for periods of time, putting significant pressure on those remaining,  making them prime targets for fatigue and stress, and a bout of illness as well.” 

The lack of staff and the difficulty in finding talent is creating business issues for both private practice and  corporate employers. Employers are now going all out to retain staff.  

“General Counsel are flexing their muscle with HR to increase budgets and increase salaries for their teams.  Private practice employers are desperately trying to plug the talent gap by offering premium salaries and  sign-on bonuses to new hires, strong reviews and healthy bonuses to staff, as well as out-of-cycle salary increases and bonuses to maintain competitive pay, and promoting lawyers much earlier than usual to retain  them.” 

“The average salary for lawyers in private practice at major firms with just one year experience is now  $100,000. Experienced senior associates with 8-9 years’ experience are taking home $240,000, as are senior corporate lawyers of similar experience. Lawyers are being promoted to senior associates after 4 years' PQE rather than the usual 5 years' PQE. In-house salaries are reasonably comparable although a significant gap is  now emerging in government salaries.” 

Mahlab warns that whilst the current pace of hyper-competitive salary rises and premium salary offerings will  likely continue for the next 6-12 months, the rapid escalation of remuneration is unsustainable, and the  bubble will burst. 

“The economic climate is changing, and there will inevitably be push-back from corporate clients who  ultimately pay for these salaries in charge-out rates. General Counsel will reach a point where they draw the  line on incredibly high salaries for inexperienced lawyers.  

“Similarly, they won't want to pay the hourly rates of the law firms which have been pushed up by  remuneration Increases. Something has to give, and this will bode well for the growth of in-house corporate teams as the cycle continues,” they said. 

The tight labour market highlights the importance of employee experience for attracting and retaining talent.  

“With high salaries flying around, people are looking for more than just good money. They’re asking: what are the training and development opportunities? What is the career path for me? Will I have work/life  balance? Is there a social impact? Is this a company or a firm I want to be aligned with? 

“Now is the time for employers to review their employee value proposition and consider if it’s getting  through to candidates. With the cost of hiring surging, employers can’t afford to get it wrong,” they said.  

Download the Mahlab Report 2022 at mahlab.com.au.