Will the ice ever thaw? ALB's Natasha Kassam asks recruiters when we can expect salaries to start going up again
It was only a year ago when Australian firms were attempting to match exorbitant UK salaries, in a bid to retain talent and fill the gaps in their busy teams. A global financial crisis later, and the firms are seemingly off the hook.
The flood of returning lawyers who have been made redundant in the UK and elsewhere overseas has allowed Australian firms to steady salaries, with a plateau predicted over the next 12 months by most recruiters. The only sectors that may see some growth are insolvency, litigation, insurance and employment.
Paul Burgess, from recruiter Burgess-Paluch, notes that upcoming pay reviews are likely to be flat and conservative. "There might be selective payrises," he says, "but a number of firms have indicated they will be implementing firm-wide freezes."
Icy days ahead
Firms to have introduced salary freezes include four of the top-tier - Mallesons, Clayton Utz, Freehills and Allens Arthur Robinson. According to recruitment firms such as Hughes Castell, salary reviews which resulted in 10% increases are definitely a thing of the past. Maximum pay increases were pegged by Hays Legal at 3-5%.
As well as redundancies and freezes, law firms have engaged in several creative practices to limit the carnage caused by the global financial crisis. Graduate intakes have been deferred by Corrs Chambers Westgarth and Thomson Playford Cutlers, operational cutbacks have been undertaken by Macpherson + Kelley and Minter Ellison, and Maddocks and Herbert Greer have introduced flexible work options.
Reactions to salary freezes
Salary freezes have been met with reactions of both relief and resentment from lawyers. "Fortunately, a majority of the redundancies have already taken place," Burgess says. "[Future selective redundancies] will be targeted to specific areas which are under-performing within the firm."
While firms may be avoiding salary reviews, the need to retain talent without raising salaries continues. "If people are moving up from one level to the next, that will always give them a pay review because they deserve that - but in terms of general pay reviews, there are mainly freezes in place," says Kellie-Jane McLean of GR Law.
This concern has been noted by Mallesons, who maintain that their 12-month firm-wide salary freeze will not be applicable to graduates admitted as solicitors or lawyers promoted to senior associate level. Mallesons and Blake Dawson will both undertake policies of 'focused recognition' on a case-by-case basis. Blake Dawson is alone in the top-tier by not following its redundancies with a salary freeze.
Many lawyers are dissatisfied with the salary freezes in place. "It is fair to say that a percentage of lawyers in firms where salary freezes have been implemented are now considering whether they should move laterally as a result," said Burgess.
On the other hand, McLean claims that only in a "normal market" would such lateral movement occur. "In this market a lot of people are aware of the GFC and they are also aware that there have been a lot of redundancies made by firms," she said. "As a result, I think people are being much more careful, they are not moving as much, and they are certainly looking at all the options before they make that decision."
The moment for mid-tiers
The fact that teams in top-tier firms have been harder hit by the GFC has created an opportunity for smaller firms to attract quality partners that might ordinarily opt for the Big Six. "This market provides a number of opportunities for astute firms who have the necessary workflows and cash reserves to hire either talented partners or senior associates laterally," Burgess says.
The market has also presented a prime opportunity for smaller firms to hire experienced lawyers returning from overseas. "People that have international training are always going to add great value to mid-tier firms," said McLean. "It is quite unusual that the top tiers are not in the position to snap up that talent and I think the end result is going to be interesting, as to the increase in top-tier lawyers working in mid-tier firms."
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