Quarter 1 Overview
Hiring levels definitely dropped during early Q1 but then started to ‘flatten’ at an earlier point than perhaps anticipated. Since then, hiring activity has gained momentum again – more than many in the industry may have expected.
We witnessed a number of associates leaving AMLaw20 firms for boutique and more specialist firms. A contributing factor was perhaps a number of lay-offs being announced by several large firms. Alongside this, associates have been recovering from two of their most intense years in ‘big-law’, particularly in terms of billable hours. In terms of practice area, we saw a lot of movement in IP Litigation, Litigation, Regulatory and Finance. Perhaps surprisingly, there has not been as much movement in Restructuring & Bankruptcy as expected. However, we anticipate this will pick up as we move further into 2023. We also have seen a lot of activity in the ‘middle market’, where we are actually seeing a small increase in lateral moves on last year.
Overall, the hiring activity that we saw in the legal market in many key geographies throughout the US was encouraging. Towards the end of last year, many in the industry worried about what 2023 would look like, especially with the word ‘recession’ being thrown around. Although things have undoubtedly become more predictable when comparing to the levels of hiring and business confidence we experienced through 2021 and early 2022, some level of ‘uncertainty’ would be difficult to avoid. However, it seems we can start to look more positively on this year after these Q1 signals.
Roles and Skill Sets in Demand
Recruitment activity during Q1 was predominantly for more senior level roles. During 2021 and early 2022, we saw a huge demand for more junior or early mid-level associates, simply so teams could service their huge increase in transactional workflow. We are now seeing firms hire a lot more ‘strategically’, focusing on high calibre candidates with more experience.
Lateral partner moves didn’t drop in frequency (or if they did in some areas, only marginally), as there was always likely to be strong demand for a partner with good transferable business.
When hiring associates now, the question of ‘do we have enough work to justify the hire?’ is often asked. Partners with a good level of transferable business bring their own tangible value and those with good books are always highly sought-after.
IP litigation associates were in short supply during Q1. A large number of firms at all levels of the market were in need of good litigators with a focus on IP. The difficulty here was that firms often required very specific backgrounds at degree level, with little flexibility due to their client-base. This could be electrical engineering or chemistry, which narrowed the talent pools even further.
Salary Trends
After a very intense year of salary increases in 2022 with increases to the top ‘market’ scale occurring on four separate occasions across the year, Q1 was always unlikely to see any further increase or change in salaries. The only notable change was in relation to signing bonuses. After a very competitive two years of lateral hiring, signing bonuses are finally starting to cool-off. Although we are still seeing signing bonuses for positions that are in high demand strategically and in more competitive counter cyclical practice areas such as litigation, the overall rates are generally lower than last year.
Forecast for Quarter 2 2023
Hiring activity in Q2 is likely to increase. Not to the extreme levels of 2021 but it’s likely that the unpredictable nature of this market adjustment is starting to settle.
We expect to see an uptick in market optimism around inflation taming and interest rate changes. We may also start to see an initial return to transactional hiring, which has been decreasing for six months now. Strong litigators are likely to remain in high demand, but simultaneously, we could see an increase in general transactional activity throughout Q2. The level of that increase is up for debate but it’s fair to say an increase generally is expected. Mid-senior level candidates will also remain in high demand, as general lateral hiring will remain more strategic rather than desperate as we saw at certain points in 2021. A few elite firms who have really ‘turned-off’ their hiring to manage cashflow and profitability are expected to return to lateral hiring. That being said, more mid-sized full-service firms are anticipated to remain the big hirers in Q2. In terms of salaries, those at the top of the market scale will probably remain the same this year after the frenetic rate of increases we saw throughout 2022. The only increases we are likely to see are if mid-sized or boutique firms who are not on the top market scale
[/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 1 Overview
Hiring levels definitely dropped during early Q1 but then started to ‘flatten’ at an earlier point than perhaps anticipated. Since then, hiring activity has gained momentum again – more than many in the industry may have expected.
We witnessed a number of associates leaving AMLaw20 firms for boutique and more specialist firms. A contributing factor was perhaps a number of lay-offs being announced by several large firms. Alongside this, associates have been recovering from two of their most intense years in ‘big-law’, particularly in terms of billable hours. In terms of practice area, we saw a lot of movement in IP Litigation, Litigation, Regulatory and Finance. Perhaps surprisingly, there has not been as much movement in Restructuring & Bankruptcy as expected. However, we anticipate this will pick up as we move further into 2023. We also have seen a lot of activity in the ‘middle market’, where we are actually seeing a small increase in lateral moves on last year.
Overall, the hiring activity that we saw in the legal market in many key geographies throughout the US was encouraging. Towards the end of last year, many in the industry worried about what 2023 would look like, especially with the word ‘recession’ being thrown around. Although things have undoubtedly become more predictable when comparing to the levels of hiring and business confidence we experienced through 2021 and early 2022, some level of ‘uncertainty’ would be difficult to avoid. However, it seems we can start to look more positively on this year after these Q1 signals.
Roles and Skill Sets in Demand
Recruitment activity during Q1 was predominantly for more senior level roles. During 2021 and early 2022, we saw a huge demand for more junior or early mid-level associates, simply so teams could service their huge increase in transactional workflow. We are now seeing firms hire a lot more ‘strategically’, focusing on high calibre candidates with more experience.
Lateral partner moves didn’t drop in frequency (or if they did in some areas, only marginally), as there was always likely to be strong demand for a partner with good transferable business.
When hiring associates now, the question of ‘do we have enough work to justify the hire?’ is often asked. Partners with a good level of transferable business bring their own tangible value and those with good books are always highly sought-after.
IP litigation associates were in short supply during Q1. A large number of firms at all levels of the market were in need of good litigators with a focus on IP. The difficulty here was that firms often required very specific backgrounds at degree level, with little flexibility due to their client-base. This could be electrical engineering or chemistry, which narrowed the talent pools even further.
Salary Trends
After a very intense year of salary increases in 2022 with increases to the top ‘market’ scale occurring on four separate occasions across the year, Q1 was always unlikely to see any further increase or change in salaries. The only notable change was in relation to signing bonuses. After a very competitive two years of lateral hiring, signing bonuses are finally starting to cool-off. Although we are still seeing signing bonuses for positions that are in high demand strategically and in more competitive counter cyclical practice areas such as litigation, the overall rates are generally lower than last year.
Forecast for Quarter 2 2023
Hiring activity in Q2 is likely to increase. Not to the extreme levels of 2021 but it’s likely that the unpredictable nature of this market adjustment is starting to settle.
We expect to see an uptick in market optimism around inflation taming and interest rate changes. We may also start to see an initial return to transactional hiring, which has been decreasing for six months now. Strong litigators are likely to remain in high demand, but simultaneously, we could see an increase in general transactional activity throughout Q2. The level of that increase is up for debate but it’s fair to say an increase generally is expected. Mid-senior level candidates will also remain in high demand, as general lateral hiring will remain more strategic rather than desperate as we saw at certain points in 2021. A few elite firms who have really ‘turned-off’ their hiring to manage cashflow and profitability are expected to return to lateral hiring. That being said, more mid-sized full-service firms are anticipated to remain the big hirers in Q2. In terms of salaries, those at the top of the market scale will probably remain the same this year after the frenetic rate of increases we saw throughout 2022. The only increases we are likely to see are if mid-sized or boutique firms who are not on the top market scale move their goal posts in order to attract top talent from bigger, more elite firms.
Challenges and Opportunities
For candidates, the biggest challenge will be the dilemma of opportunity cost. Now is a superb time to make a move to firms in the market who are really starting to build market share, whilst some elite firms are in a holding pattern on their hiring. This will certainly create a lot of opportunity for progression at these ‘new’ firms as they build their groups. Having said this, the window won’t be open for long before the market picks back up again and things get more competitive. Equally, the opportunity cost is remaining at their current firms and hoping things will pick up quickly so they can continue on track. If you are a candidate, certainly be open-minded to some pretty unique opportunities that are popping-up in this market. We are now seeing some really impressive and rare offerings that didn’t have the chance to come forward during the last two years. For some employers, the greatest challenge from a hiring perspective will be attracting the same level of talent without being able to offer more aggressive rates.
Signing bonuses certainly helped a number of top firms tempt top associates away from their current employers, even when those candidates were in very strong positions. Firms looking to hire therefore have two options: spend the money anyway and get even better talent/value for money than 2021/2022 (especially those who have managed cash-flow well over the last two years) or create an attractive offering in other ways. This might include an attractive progression pathway, strong internal development programme or creating a more empathetic culture than that of some elite firms deemed to be more aggressive. From a firm’s perspective, if you have the ability to secure top talent this quarter before things really pick up again as we move into Q3, then do so before it becomes more competitive. It is worth making a higher financial commitment now and removing ‘red tape’ surrounding your hiring process to secure talent from what is currently one of the highest quality legal talent pools we have seen in years.
Looking Ahead
Although the crazy lateral hiring market of the last two years seems to have dissipated, there are still plenty of opportunities for both firms and candidates. Due to some ‘over-hiring’ at the top end of the market, a variety of top talent is available. We are also seeing firms who have managed their cost-base really well over the last two years come forward, and are now taking advantage by growing market share. This is both creating great opportunities for candidates who join those firms and for the firms who make those hires.
The hiring market certainly remains competitive and is only expected to become more so as the year goes on. The general sentiment towards the market is much more positive at this stage than many thought it would be. Consumer confidence remains high, despite ongoing market uncertainty.
[/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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