Candidate-driven, hybrid working and a possible recession: What will legal recruitment look like in 2023?

In March 2021, tech giant Microsoft published research revealing that over 40 per cent of the global workforce was actively considering leaving their employers. They will do so, Burgess Paluch Legal Recruitment director Paul Burgess said in October 2021, “as a result of a shift in both the way they perceive the value of their labour and what employers offer in return”.

The research suggested, he noted, that a “psychological shift as a result of the pandemic will result in employees moving on from their present roles, in search of either employers who enrich their lives beyond mere salaries and benefits to seek out either new careers or employers who add more value to their lives”.

The Great Resignation has continued to impact different sectors on a global scale, with Australia’s legal market no exception.

And according to Naiman Clarke Legal associate director Kristina Steele, this is a trend that is showing no signs of slowing down.

“December and January always see recruitment becoming quieter, only for a period of time, and there is nothing to suggest that the Great Resignation, which was the hot topic of 2022, will not continue into 2023,” she told Lawyers Weekly.

For Naiman Clarke candidates, their priorities will remain vastly similar moving into next year, with autonomy, a clear career path and progression, training opportunities, mentoring and an above-market-rate salary, with bonus potential being high on the priority list.

Additionally, Ms Steele noted that a high-quality and diverse workload was of importance to candidates, as well as signs of good firm culture and high staff retention.

“To attract and retain the best candidates in a difficult market, employers should consider remaining competitive with remuneration by researching market data and consulting your recruitment agents, [putting in place] achievable bonus schemes [and] allowing flexibility and working from home arrangements,” she said.

“Arrange regular social events, training and development days, a day off for your birthday and even team or firm retreats — this will boost morale and culture. Introduce health and wellbeing benefits and modern policies and procedures, e.g., paid parental leave and extra annual leave.

“Have clear and transparent performance reviews to discuss future progression/promotion to ensure candidates achieve their future goals. Ensure senior lawyers have the time and skills to properly mentor juniors, as well as providing access to quality work and clients. Finally, value your staff — do not wait until candidates have offers elsewhere to prove their value to the team/firm by way of counteroffer.”

Flexibility and hybrid working high priority

Burgess Paluch Legal Recruitment managing partner Kirsty McNay echoed a similar sentiment — and emphasised the continuing popularity of flexible working post-pandemic.

“Remuneration, engagement, flexibility and work/life balance will likely continue to be the major drivers for candidates going into 2023. We believe the flexibility/hybrid working instigated by COVID will continue to be sought after by many, particularly senior lawyers,” she said.

“The challenge for law firms, in particular, will continue to be how they balance this with client needs and the supervision and mentoring that the more junior/mid-level lawyers require for career development.”

In law firms, there has been a notable “shortage of talent”, particularly at the associate and senior associate level — something which was only exacerbated due to the pandemic.

“We have seen foreign-born candidates returning to their home country and Australian-born candidates seeking opportunities overseas due to higher salaries (sometimes double in the UK and the US) and a desire to travel following lockdowns.

“From a candidate perspective, many felt overworked and unpaid due to salary, bonus and/or promotion freezing. Some firms really stepped up at the end of this financial year, offering up to 20 per cent salary increases; however, some firms were ‘left in the dust’ where these increases were not offered, meaning many candidates went to market to see if they could achieve better elsewhere,” Ms Steele explained.

“Our clients have sought our assistance consistently in the current market due to having a vast number of roles to fill, the lack of time or manpower to dedicate to recruit all their roles and the mounting competition across the country to secure the best talent. They have resorted to offering sign-on bonuses, flexibility or WFH days and other attractive benefits to secure candidates, as well as considering candidates that do not exactly tick all the boxes but whom they are willing to train/mentor.”

Multiple partners have expressed concerns regarding missed mentoring and learning opportunities in the face of flexible working, which could potentially be the downfall of junior lawyers should they cease to come into the office at all.

In May, UK firm Stephenson Harwood told its staff they could work from home permanently — provided they take a 20 per cent pay cut. Whilst this is a far cry from many BigLaw firms in Australia, certain categories of employees — such as those with a disability or parental or carer responsibilities — actually have a right under the Fair Work Act to make a request for flexible working arrangements.

However, these types of arrangements, as a rule, come down to personal preference and values, said Taylor Root head of Australia Hayden Gordine.

“I believe we will see a continuation of what we have seen [over] the past two years; lawyers are asking themselves fundamental questions about their jobs, why they are lawyers, what do they want out [of] their career and where do they want to practise it. There is no doubt COVID changed what we want out of our jobs, and we are now witnessing more individual priorities rather than a whole-market trend,” he explained.

“For some lawyers, it is an inclusive workplace; for others, it is working on clean energy projects, the priority could be four days a week, flexible work arrangements, or the opportunity to work on challenging global transactions which required burning the midnight oil.”

Potential recession = a turbulent market

This year, themes of a potential recession have also impacted the legal recruitment market, with the federal government growing increasingly concerned about the likelihood of a recession in major economies, and Treasurer Jim Chalmers signalling that the global economic outlook is “difficult”.

According to Mr Gordine, the practice groups for which law firms are hiring will “definitely shift” if a recession occurs.

“Law firms are traditionally resilient to recessions as commercial disputes rise and distressed asset transactions increase,” he told Lawyers Weekly in October.

“No one can say for sure, but if demand for legal services decreases, then this will have a negative effect on legal recruitment across all practice groups.”

In seeing the market become one in which candidates no longer wield as much leverage as they have had in the last 18 months — due to overwhelming demand for legal services — there will be, Mr Gordine said, a “shifting in that balance of power”.

“We have already seen law firms begin to tighten hiring standards; if Australia does go into a recession, it is likely to seem like a steep decline, but we have come from extreme lofty heights,” he opined.

A recession is also likely to impact the in-house market — with legal department directors musing in October that recruiters are likely to see turbulence before candidates, as well as an increased number of available candidates compared to the Great Resignation.

However, a recession will also impact legal professionals differently depending on the sector of law they practice in.

“The effects will differ depending on a lawyer’s practice group. Recession-resilient practice groups like litigation, employment, restructuring and insolvency will see demand increase as commercial disputes rise and distressed asset transactions increase,” Mr Gordine explained.

“Other practice groups are likely to see a steep decline [in] the numbers of opportunities available matching the volume of transactions in the market.”

Ms McNay agreed with this notion — and said that a global downturn would, unsurprisingly, have a global impact on the legal recruitment market.

“The looming recession will undoubtedly have some impact on the market. There is likely to be a continued demand for in-house lawyers as companies ramp up their in-house legal teams to cut costs. In relation to private practice, there are currently global firms in the UK and US that have already instigated hiring freezes.

“However, while some practice areas are less busy, for example corporate/M&A, other practice areas, such as insolvency, ramp up. Even in a less buoyant market where there may be less recruitment happening, high-calibre lawyers will always be in demand. The market may pivot from being candidate-driven to a more employer-driven one, which means lawyers need to ensure they are at the top of their game,” she said.

“We have also found that in previous economic downturns, smaller or mid-sized firms often continued to recruit heavily (these are the clients that kept us busy when COVID first hit) — even if the largest firms weren’t doing so.”

However, a recession is likely to mean that candidates will no longer have their pick of the market following the Great Resignation, according to Ms Steele, who said that whilst those just entering the profession will have already secured jobs for next year, mid-level lawyers should start looking sooner rather than later.

“Many firms have recently completed their clerkship programs and hired their future graduates already. Many of Australia’s leading law firms have increased their graduate intake, but there is rumour that the number of applications has fallen this year compared to previous years. It is suspected that this is due to many graduate lawyers ‘deferring’, seeking to travel before they settle into their legal careers in Australia following the COVID lockdowns, or seeking higher salaries whilst working internationally,” she explained.

“It is likely that any recession will see law firms being more considered regarding their recruitment, which will result in the end of the ‘candidate’s market’. However, it is predicted that if a recession does hit, this will likely begin in late 2023/early 2024. So, if you are considering going to market for a new role, now or in early 2023 will be the best time to do it.”

Recruitment in 2023

Moving into next year, candidates will need to carefully consider moves, Mr Gordine predicted.

“We are heading towards a more traditional legal recruitment market where good lawyers coming to the market will have a selection of great law firm options to consider rather than every law firm in town,” he said.

“Lawyers, therefore, need to ensure it is the right move. Compensation, long-term career growth, global or internal mobility, work/life integration and culture should be given as much weight as each other in considering a move.”

And in addition to candidates continuing to seek work/life balance, flexibility and WFH arrangements, Ms Steele said that NewLaw will “continue to disrupt traditional provision of legal services” and private practice will change things up moving into 2023.

“Many of our large law firms have delved into the contracting market and are relying on us as an avenue of supply; contracting for lawyers is going to continue to be big business in 2023, especially if the market dips globally. Contracting provides the flexibility for organisations to only employ the lawyers they need on a project or period basis.

“Some private practice law firms are introducing a new billable hours structure, either by reducing daily targets, restructuring the targets or removing the targets entirely. This has been, and continues to be, extremely attractive to candidates and may see a reduction in lawyers seeking to leave private practice for government or in-house roles where time recording, and billable hours, are not a burden they have to bear,” she explained.

“Increased demand for legal services is expected to continue into 2023, meaning legal recruitment will continue to be busy to account for the demand.”