Employee retention is also now a “critical” strategic move for firms, as competition for top talent remains fierce in 2024. The candidate-short market in Australia has resulted in financial incentives such as a “loyalty tax” for firms to retain lawyers and significant salary hikes for entry-level law grad roles.

But with salaries reportedly slowing down and raises come FY2024–25 likely to be lower than previous years, firms have turned to people and culture-led initiatives, including flexibility and value alignment, despite the majority of lawyers preferring pay rises to perks.

However, as recently reported by Lawyers Weekly sister brand, HR Leader, in the current economic climate, more Australian workers have said they would accept alternative benefits, aside from a raise, along with a promotion.

New research from Robert Half revealed that employees would accept bonuses or revenue sharing (59 per cent), more flexibility with regards to working hours (59 per cent), and more holidays (58 per cent) as tight company budgets demand more creative solutions.

In terms of benefits employers would offer aside from a salary hike, 56 per cent said they would offer more flexibility, and 54 per cent said they would be open to paid sabbaticals – something Robert Half director Nicole Gorton said came from tighter budgets.

“Promotions remain key to retaining talent, and they generally go hand in hand with increased pay. However, with tight compensation budgets, companies are forced to be more creative when promoting employees, and employees are open to accepting alternative rewards,” she said.

“While financial reward still tops the list, at a time when more employers expect their employees to work in the office more often, flexibility is seen as a bargaining chip that may be just as highly valued by employees as financial rewards. Being able to work from home may also provide a financial benefit to workers by reducing costs such as commuting expenses.”

The team at u&u. Recruitment Partners confirmed that in the legal profession, firms are also using alternative benefits to reward staff.

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“In addition to competitive remuneration and bonuses (in line with market trends), legal managers may use additional days of leave or paid time off (outside the standard annual leave days), to reward lawyers for their hard work. Flexibility to work from home and log on/off as required to balance family time is also still prevalent in the market. While role titles are important, our experience lately is that a majority of candidates can be flexible on their title if the appropriate flexibility and career progression is inherent in the role,” it said.

“With some firms increasing their billable hour expectations of mid-senior level lawyers (from 6.5 hours per day to 7/7.5 per day), there has never been a more important time for law firms to start considering what else they can be doing to ensure their strong performers avoid burnout. We would encourage employers to have open and transparent conversations with their employees to understand what incentives are valuable to them and their circumstances.”

Firms can also retain talent by upskilling their staff and offering opportunities for management and leadership – although Carlyle Kingswood Global legal, governance and in-house director Phillip Hunter cautioned that these benefits shouldn’t necessarily be used wholly in place of a pay raise.

“In 2024, legal managers can retain talent by offering opportunities for upskilling and funded education, rather than simply increasing workload without additional pay. Providing chances to work with different groups within the business to gain varied experience can be beneficial.

“While most candidates are open to such alternatives, financial constraints like mortgages and bills mean that monetary compensation remains a primary motivator, especially when additional responsibilities are added. A ‘promotion’ without increased compensation or accountability is not a true promotion; it benefits only the company. Similarly, an employee being paid the same for doing less work is unacceptable. The principle of ‘you get what you pay for’ remains pertinent,” he said.

“Non-monetary benefits, such as opportunities for leadership and management skills development, can be effective in retaining legal professionals. Providing lawyers with experience in new areas can help them progress to more significant roles within larger companies. However, it is crucial that these opportunities are meaningful and not seen as a way to avoid salary increases. Management should be transparent with employees, and vice versa. Good employers provide opportunities that make staff more appealing in the market, acknowledging that sometimes employees need to move on to advance their careers.”

This is also a global trend, according to G2 Legal Australia director Daniel Stirling – who noted that the LinkedIn Employer Value Propositions Survey (May 2023–April 2024) showed that for legal professionals in the UK, flexibility remained important. In the same survey, 42 per cent said that opportunities for career growth were also of high importance.

“I feel that lawyers are more likely to consider a broader range of issues when selecting a new role or when deciding whether to stay with their current employer than has been the case in the past. There is no doubt that salary is still a major consideration, but a recent UK survey showed that 64 per cent of lawyers valued flexibility as one of the most important benefits while 62 per cent named compensation and benefits as critical,” he said.

“This goes to show that offering other tangible benefits can be extremely attractive when funds may not be available for large pay rises. As well as flexibility, lawyers also value opportunities for training and skill development, career progression and gaining additional responsibility in their role. Other benefits such as additional leave and the chance to share in the success of the company through bonus schemes or share schemes are attractive options and an extra incentive for high performance.

“Lawyers will still value and expect some level of salary increase at review time. Particularly with cost-of-living increases and high interest rates. But most understand that these may not be such dramatic increases as they have received in recent years, and therefore, any additional help and support legal managers can provide will be beneficial at review time.”

Lawyers Weekly will host its inaugural Partner Summit on Thursday, 20 June 2024 at The Star, Sydney, at which speakers will address the range of opportunities and challenges for partners and partners-equivalent, provide tips on how they can better approach their practice and team management, and propel their businesses towards success. Click here to book your tickets – don’t miss out! For more information, including agenda and speakers, click here.

Lauren Croft

Lauren is a journalist at Lawyers Weekly and graduated with a Bachelor of Journalism from Macleay College. Prior to joining Lawyers Weekly, she worked as a trade journalist for media and travel industry publications and Travel Weekly. Originally born in England, Lauren enjoys trying new bars and restaurants, attending music festivals and travelling. She is also a keen snowboarder and pre-pandemic, spent a season living in a French ski resort.