Quarter 2 Overview
In Q2, we started to see a return to growth and/or hiring strategies relating to growth, rather than simply ‘strategic replacements’, but only for specific practice areas or geographies, which varied from firm to firm. Many firms are still taking a ‘wait and see’ approach in the majority of practice groups but starting to execute growth in others.
After a ‘slowdown’ in transactional practice areas, firms are starting to experience excess headcount in those areas. We would therefore typically expect to see some ‘re-tooling’ or staffing of those surplus resources into other practice groups that need additional support. However, owing to the fact the majority of these practice areas are more contentious or litigation based, this hasn’t been possible, therefore firms are left still needing to make lateral hires in those contentious practice areas. As a result, firms are left with lower productivity per head, without enough natural attrition to counter it. Despite this, it doesn’t seem that further lay-offs are on the horizon, although it does go against hiring justification.
Hiring Activity
Hiring levels in Q2 were nowhere near as low as many expected in January. Lack of consumer confidence was overstated and we are still seeing strong levels of lateral hiring activity, especially across mid-market and boutique firms. Indeed, levels across clients started to increase towards the end of Q2, with firms starting to regain confidence in the market and look towards growth again. This was mainly for specific practice areas and geographies however, not firm-wide. We also started to see some return to mid-level/junior hiring, which was largely non-existent during Q1.
Having said this, overall firm productivity has reduced from 2022. Consequently, many firms are still relying on some natural attrition to allow for productivity per head to return to normal levels, after two years of significant headcount growth. In terms of which industries and businesses have seen the highest levels of hiring activity, Restructuring, Commercial Litigation and IP Litigation practice groups remained strongest, although IP litigation activity has started to ‘simmer’ slightly. New areas where we saw an increase in recruitment include Insurance Litigation, Finance, Project Finance and Investment Funds hiring, which is encouraging. We also saw an uptick in hiring activity in the lateral partner arena. This time, larger more ‘elite’ firms have started to make big strategic hires into some of their key groups through partner additions, not just the middle-market as we saw in Q1.
Challenges for Candidates & Firms
The biggest challenge for top candidates is likely to be timing: when to consider a move. We are at a cross-roads in the year, where hiring activity has been decreasing and then flattening, to now facing a potentially significant rise as larger firms start to hire again going into Q3.
The dilemma is whether to move now and ‘beat the rush’, therefore potentially facing a less competitive interview process, or move a little later in the hope of more competitive offer rates but with the risk of ‘missing the boat’ and competing with more candidates for the top positions.
For firms, productivity is not yet in the right place and natural attrition has failed to build momentum. Some firms now risk having to enter the market a little earlier than they would have hoped in order to secure top talent at lower offer rates, ready for an increase in activities across the market across Q3/Q4.
Salary Levels
After the crazy year of compensation increases across the industry during 2022, 2023 was always unlikely to see any further rises. During the first half of this year, we have seen no increases across the market and generally offers are becoming a little less generous. Offer rates have decreased on average, simply due to the absence or lower rates of signing bonuses.
In-Demand Skill Sets
Strong IP litigators with the right technical background or litigators with more ‘niche’ elements to their practice are still seeing premiums in certain cases. This is simply due to the severe lack of strong candidates with those backgrounds in comparison to the demand for that particular work.
Forecast for Quarter 3 2023
Moving into Q3, we anticipate that there will be an increase in hiring. Litigators are likely to remain in high demand but, in addition, we may start to see an increase in hiring levels across several transactional practice areas such as finance, corporate and investment funds. This certainly won’t be to the levels of last year but is expected to be an increase on Q1 and Q2 of this year. We are also seeing a strong uptick in activity across employment, insurance and executive compensation.
In terms of which industries will be most active, ‘middle-market’ firms will probably remain strong hirers. For the first time this year, we may also start to see a return to hiring for ‘the elite’, as confidence continues to return to markets and a few ‘headline’ transactions are starting to pop up. We also expect lateral partner hiring to continue to increase for both the elite and middle-market sectors.
With regards to salaries, we believe these will remain the same, even as hiring activity starts to increase throughout the second half of the year. This is simply because salary rises were more frequent than expected across the last two years. As a result, firms have some catching-up to do in terms of productivity per lawyer, before we start to see a return to increases. Offer rates may start to climb and generally become more competitive as demand for top laterals grows. This will be more in the form of signing/additional bonuses however, rather than salaries.
Looking Ahead
Firms would be wise to ‘get ahead of the game’ and start making key hires at a time where the supply of top talent is greater and available at less aggressive rates. Activity will inevitably increase as we move closer to the end of the year. As a result, the firms who made their hires during early Q3 will reap the benefits when hiring becomes more competitive in the next quarter, as they will be under less pressure to make the hires.
For larger, more elite firms who have yet to really kick-start their hiring or ‘re-open their doors’, the advice is to enter the hiring market as early as possible to ensure access to a larger, less expensive talent pool, before demand really starts to pick-up towards the end of Q3 and then into Q4.
[/fusion_text][fusion_text columns=”1″ animation_direction=”left” animation_speed=”0.3″ animation_delay=”0″ hide_on_mobile=”small-visibility,medium-visibility” sticky_display=”normal,sticky” column_spacing=”150″]Quarter 2 Overview
In Q2, we started to see a return to growth and/or hiring strategies relating to growth, rather than simply ‘strategic replacements’, but only for specific practice areas or geographies, which varied from firm to firm. Many firms are still taking a ‘wait and see’ approach in the majority of practice groups but starting to execute growth in others.
After a ‘slowdown’ in transactional practice areas, firms are starting to experience excess headcount in those areas. We would therefore typically expect to see some ‘re-tooling’ or staffing of those surplus resources into other practice groups that need additional support. However, owing to the fact the majority of these practice areas are more contentious or litigation based, this hasn’t been possible, therefore firms are left still needing to make lateral hires in those contentious practice areas. As a result, firms are left with lower productivity per head, without enough natural attrition to counter it. Despite this, it doesn’t seem that further lay-offs are on the horizon, although it does go against hiring justification.
Hiring Activity
Hiring levels in Q2 were nowhere near as low as many expected in January. Lack of consumer confidence was overstated and we are still seeing strong levels of lateral hiring activity, especially across mid-market and boutique firms. Indeed, levels across clients started to increase towards the end of Q2, with firms starting to regain confidence in the market and look towards growth again. This was mainly for specific practice areas and geographies however, not firm-wide. We also started to see some return to mid-level/junior hiring, which was largely non-existent during Q1.
Having said this, overall firm productivity has reduced from 2022. Consequently, many firms are still relying on some natural attrition to allow for productivity per head to return to normal levels, after two years of significant headcount growth. In terms of which industries and businesses have seen the highest levels of hiring activity, Restructuring, Commercial Litigation and IP Litigation practice groups remained strongest, although IP litigation activity has started to ‘simmer’ slightly. New areas where we saw an increase in recruitment include Insurance Litigation, Finance, Project Finance and Investment Funds hiring, which is encouraging. We also saw an uptick in hiring activity in the lateral partner arena. This time, larger more ‘elite’ firms have started to make big strategic hires into some of their key groups through partner additions, not just the middle-market as we saw in Q1.
Challenges for Candidates & Firms
The biggest challenge for top candidates is likely to be timing: when to consider a move. We are at a cross-roads in the year, where hiring activity has been decreasing and then flattening, to now facing a potentially significant rise as larger firms start to hire again going into Q3.
The dilemma is whether to move now and ‘beat the rush’, therefore potentially facing a less competitive interview process, or move a little later in the hope of more competitive offer rates but with the risk of ‘missing the boat’ and competing with more candidates for the top positions.
For firms, productivity is not yet in the right place and natural attrition has failed to build momentum. Some firms now risk having to enter the market a little earlier than they would have hoped in order to secure top talent at lower offer rates, ready for an increase in activities across the market across Q3/Q4.
Salary Levels
After the crazy year of compensation increases across the industry during 2022, 2023 was always unlikely to see any further rises. During the first half of this year, we have seen no increases across the market and generally offers are becoming a little less generous. Offer rates have decreased on average, simply due to the absence or lower rates of signing bonuses.
In-Demand Skill Sets
Strong IP litigators with the right technical background or litigators with more ‘niche’ elements to their practice are still seeing premiums in certain cases. This is simply due to the severe lack of strong candidates with those backgrounds in comparison to the demand for that particular work.
Forecast for Quarter 3 2023
Moving into Q3, we anticipate that there will be an increase in hiring. Litigators are likely to remain in high demand but, in addition, we may start to see an increase in hiring levels across several transactional practice areas such as finance, corporate and investment funds. This certainly won’t be to the levels of last year but is expected to be an increase on Q1 and Q2 of this year. We are also seeing a strong uptick in activity across employment, insurance and executive compensation.
In terms of which industries will be most active, ‘middle-market’ firms will probably remain strong hirers. For the first time this year, we may also start to see a return to hiring for ‘the elite’, as confidence continues to return to markets and a few ‘headline’ transactions are starting to pop up. We also expect lateral partner hiring to continue to increase for both the elite and middle-market sectors.
With regards to salaries, we believe these will remain the same, even as hiring activity starts to increase throughout the second half of the year. This is simply because salary rises were more frequent than expected across the last two years. As a result, firms have some catching-up to do in terms of productivity per lawyer, before we start to see a return to increases. Offer rates may start to climb and generally become more competitive as demand for top laterals grows. This will be more in the form of signing/additional bonuses however, rather than salaries.
Looking Ahead
Firms would be wise to ‘get ahead of the game’ and start making key hires at a time where the supply of top talent is greater and available at less aggressive rates. Activity will inevitably increase as we move closer to the end of the year. As a result, the firms who made their hires during early Q3 will reap the benefits when hiring becomes more competitive in the next quarter, as they will be under less pressure to make the hires.
For larger, more elite firms who have yet to really kick-start their hiring or ‘re-open their doors’, the advice is to enter the hiring market as early as possible to ensure access to a larger, less expensive talent pool, before demand really starts to pick-up towards the end of Q3 and then into Q4.
[/fusion_text][fusion_text animation_direction=”left” animation_speed=”0.3″ animation_delay=”0″ hide_on_mobile=”large-visibility” sticky_display=”normal,sticky”]Salaries
| Role New York, DC, San Fran: The Elite (AmLaw 100) |
Private Practice – US Firm Permanent Salary Per Annum US$ Range (Base Salary) |
|---|---|
| Partner (Equity) | 1.4m (average total comp) |
| Counsel / Salaried Partner | 400 – 550k |
| 8th year | 365 – 415k |
| 7th year | 350 – 400k |
| 6th year | 330 – 370k |
| 5th year | 305 – 345k |
| 4th year | 275 – 295k |
| 3rd year | 240 – 250k |
| 2nd year | 215 – 225k |
| 1st year | 205 – 215k |
| New York: Mid Market (AmLaw 100 -200) |
Private Practice – US Firm Permanent Salary Per Annum US$ Range (Base Salary) |
|---|---|
| Partner (Equity) | 800k (average total comp) |
| Counsel / Salaried Partner | 315 – 450k |
| 8th year | 300 – 415k |
| 7th year | 275 – 400k |
| 6th year | 255 – 370k |
| 5th year | 240 – 345k |
| 4th year | 225 – 295k |
| 3rd year | 200 – 250k |
| 2nd year | 180 – 225k |
| 1st year | 150 – 215k |
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