“Like their larger siblings, small and medium firms have been struggling to recruit for the last 12 months,” he said.  

“While the market has been difficult for them, particularly where they may have a slightly lower budget, they can also be less affected by parity issues and more willing to pay above the market for key lawyers, so we have seen some of our strongest offers from this segment of the market.”

Compared with salary inflations at BigLaw firms amid the Great Resignation and war for talent, smaller firms are “definitely struggling”, deduced Naiman Clarke managing director Elvira Naiman.

VIEW ALL

“There is a disconnect between what they can charge their smaller clients and what BigLaw can charge its very large and sometimes publicly listed clients. It’s hard to compete on salary in light of this,” she said.  

“Many boutiques are competing on a better/truer work/life balance, better culture, better access to partners and clients, more leave and other perks.”

Despite this — and despite many smaller firms being typically unable to keep up with rising BigLaw salaries — a potential global downturn could bring some relief, according to Travis Schultz & Partners managing partner Travis Schultz.

“There’s no doubt that lawyer salaries have increased in the current war for talent; and that this has impacted small and medium-sized firms to some extent,” he said.  

“But it’s the top of the cycle, and with a looming downturn across all sectors, it’s only going to get easier for firms to recruit.”

In addition to the Melbourne and Sydney legal recruitment markets being influenced by lockdowns, a potential recession could also cause disruption and turbulence moving forward.

The government has voiced its growing concerns about the increasing probability of a global recession — and compared to BigLaw firms, which often have the increased capability to support complex cross-border investments into Australia, boutique and SME firms will need to brace and prepare for a potential recession in different ways.

And — as previously reported by Lawyers Weekly — a recession is also likely to shift the balance of power within legal recruitment.

Traditionally, however, SME and boutique firms have suffered less in recessions than top-tier firms, according to Mr Burgess.

“They are less reliant on top-end M&A activity, finance and projects, and their practice groups in litigation, property, family and commercial often remain reasonably busy,” he said.

“A looming recession will take some time to impact the market negatively, as there is plenty of stored demand for lawyers that will not quickly be satiated and there is unlikely to be a significant increase in the number of lawyers seeking roles. So, in my opinion, the effect of a recession on the market is likely to be slower than some are expecting.”

In addition to smaller firms potentially surviving better during a recession than their BigLaw counterparts, a global downturn is also likely to make the legal recruitment market less candidate-driven, added Ms Naiman.

“Any recession is likely to shift the power balance back to the firms, where they may have more control over setting the WFH and other flexibility parameters coupled with a backward movement in salary trends,” she said.

“Boutique firms have generally faired reasonably well during recessionary periods. They have less overheads and are themselves (as well as their clients) often more agile in terms of how much of their fixed costs they can control. We find during recessionary times the good boutique firms can pick up some real talent.”

And because of this, smaller firms will also be able to start to compete in terms of candidate values that don’t involve salaries, Mr Schultz added.

“While BigLaw will attract recruits with the promise of big brands and higher pay packets, there’s a very real opportunity for SMEs to compete on the non-financial factors that loom large in the decision by lawyers as to which firm is right for them.

“Culture, relationships, values, mentorship and flexibility are the key reasons being given to me of late as to why lawyers are looking to join us, rather than stay where they are. Sure, there’s a threshold level of remuneration that has to be met, but once financial needs are in the right ballpark, these other considerations seem to become the real decision drivers,” he explained.

“If smaller law firms create a reputation for expertise, fairness, great culture and providing an opportunity for professional growth, they will actually have a very real advantage over BigLaw — where there is often a perception of rigid structures, inflexible policies and high expectations of professional staff.”