mahlab report 2017€¦ · mahlab report 2017 rivate ractice 1 the mahlab report has always been...

PRIVATE PRACTICE AUSTRALIA - INTERNATIONAL

Mahlab Report 2017

Introduction 1Partners 6Private Practice Lawyers 9International 15

All artwork reproduced with the kind permission of the artist, Bill Sampson www.billsampson.net

Figures contained within tables in this survey have been rounded to the nearest $500 and are quoted in local currency.

© Mahlab Recruitment (Vic) Pty Ltd 2017 © Mahlab Recruitment (NSW) Pty Ltd 2017

www.mahlab.com.au

1Mahlab Report 2017 Private Practice

The Mahlab Report has always been informed by a unique mix of industry knowledge, research and discussions with clients and lawyers, with the aim of producing a useful, accessible guide for the legal profession.

We interviewed clients and lawyers and engaged in discussion groups, which enabled us to source information more widely from the legal profession about work conditions, remuneration and emerging trends.

We thank our consultants for their commitment, work and effort in providing quality search services to our clients and in assisting lawyers with career management and placement services. Their efforts and work have enabled the discussions regarding the legal profession, employment experiences, trends and remuneration which have informed the Mahlab Report 2017.

We thank all contributors for their frank perspectives and the generosity with which they have shared their information and experiences. It is this first-hand information that has equipped us to produce industry relevant reports that not only inform but also

challenge best practice.

We invite you to join the social media conversation about #MahlabReport2017 by following @MahlabLegal or connecting with us on LinkedIn.

KEY FINDINGS

Value and innovationAn increasingly savvy and demanding corporate client group, and investment in technology and innovation are the key elements driving the growth and speed of the legal profession this year. Corporates are demanding faster and cheaper solutions from their law firm panel members but also expect innovation and business partnering. Competition on price and service, including value-adds, is more ferocious than ever; innovation is the catch-cry of corporations in their demands of law firms.

Corporates have also led the way in their use of technology and a nimble work force, with a high take-up of technology to track external spend and manage process in compliance, litigation and transactional work and the employment on a needs basis of contract, secondee, part time and flexible staff. While law firms are also investing heavily in new technologies, many still struggle with flexibility of resourcing, the formation of contract labour subsidiaries notwithstanding.

Outsourcing of legal process by mid sized and larger firms and companies with a sophisticated in-house legal function is now the norm.

Corporates are retaining more and better work in-house. The trend is for only very specialised and very large transactions and litigation to be outsourced,

Mahlab Report 2017The Mahlab Report is a leading source of insight for employers and professionals into Australia’s legal industry. The Mahlab Report is recognised for its in-depth information about the legal profession, employment experiences, trends and remuneration tables.


Introduction

generally to the larger firms. Not surprisingly, firms of all sizes report a decrease in work flow outside these categories (and even within, as competition for each matter is heavy), although small firms may still retain high volume, low margin work from a corporate client. Private practice ‘winners’ are those firms with clients not large enough to hire their own lawyers – yet. Government continues to provide a steady work flow to panel firms, albeit at lower hourly rates.

New entrants, including US firms, have disrupted the local market particularly in Sydney and Melbourne. Well-established global firms (themselves newcomers only five years ago) are facing aggressive competition for their partners, many of whom have moved to new global entrants with deep pockets.

Firms feel pressured not only to cut their fees, but also to provide secondees, CLE, entertainment and engagement opportunities for their in-house counsel clients. At the same time, corporates are sourcing team members from the very firms that service them, building in-house capability beyond broad commercial law into specialised areas such as competition, finance and mergers and acquisitions.

Demand for lawyers with 3 to 6 years’ experience is particularly high. Areas of demand in private practice have centred on construction and infrastructure, (especially front-end), property, competition, IT, banking and finance, wealth management and general commercial including business structuring and trusts. Companies are competing head-on with their law firm providers for the same talent pool.

Legally qualified individuals are becoming more deeply embedded in the company, not only in legal and company secretary roles but also risk, compliance and regulatory. The general counsel role has in many instances expanded to encompass other service areas such as governance, corporate affairs and insurance. Company secretarial recruitment has been stable.

As opportunities change and develop in the corporate world, the path to partnership is slower than ever. Disgruntled senior associates, while paid well, are more inclined than ever to explore ‘loss-leader’ career choices in government and in-house law. Senior associates (and partners) are also more motivated than ever to explore careers outside the law.

The market has responded favourably, with senior lawyers being regarded as highly attractive candidates for non-executive directorships, CEO and senior government roles. Management consulting, participation in start-ups and quasi legal roles also attract many lawyers.

Equity partnership numbers are falling as equity is redistributed from existing equity holders whose status is changed to non-equity or they are encouraged to leave the firm. Salaried partnership is being used as a smokescreen: to all the world a partner but in reality, still an employee. Overall, partner income has fallen slightly this year.

Hiring activity has fallen in Perth but remains strong in Sydney and Melbourne. Brisbane is picking up; Adelaide remains flat.

The market has responded favourably, with senior lawyers being regarded as highly attractive candidates for non-executive directorships, CEO and senior government roles.


IntroductionIntroductionIntroduction

RemunerationIn private practice, movement in remuneration has continued to be conservative, with an average national salary increase of 3.5%, down from 3.8% in 2016. However, this figure belies the ‘hot spots’ of demand and remuneration-based retention strategies. Hard-to-find and hard-to-replace lawyers in banking and finance, for example, might enjoy a 25% uplift upon promotion as a senior associate; new global entrants will pay well above the odds to secure partners and teams.

Some lawyers with 3 to 6 years’ post qualification experience in the larger firms enjoyed increases of 7–10%. High-achieving senior associates in similar sized practices were awarded increases of up to 10%, plus a bonus.

In-house remuneration movement is generally linked to corporate performance: lawyers are not singled out for special treatment. Having said that, in-house lawyers joining a company from private practice will usually find that their current remuneration is at least matched or a slight increase applied as inducement in a competitive market. Overall in-house remuneration has risen by a national average of 2.7% compared to 3.4% last year.

Bonuses in private practice are still applied where individual performance is exceptional; corporate bonuses are less common due to the company not hitting its targets. That said, 62% of lawyers working in the corporate sector still have a bonus component in their package, and this percentage has been fairly consistent for over five years.

Interestingly, an in-house candidate this year is more likely to ask for and receive compensation for the bonus they will forego if they change from one corporate to another.

InternationalInternational firms, especially those based in the US, have continued to enter the Australian market, in some instances through aggressive recruitment of whole teams.

Global instability and tighter visa rules has dampened enthusiasm for Australian lawyers seeking adventure in London and Australian firms’ interest in foreign lawyers, although inter-office secondments continue in the global firms and can be an effective retention strategy for mid level lawyers.

Katherine Sampson Lisa Gazis

62% of lawyers working in the corporate sector still have a bonus component in their package, and this percentage has been fairly consistent for over five years.


State of the market

CORPORATE

PRIVATE PRACTICE

HIRING ACTIVITY

Sydney

MelbournePerth

Adelaide

Brisbane

Average national salary

increase of 3.5% down from 3.8%

last year

Average national salary

increase of 2.7% down from 3.4%

last year

Current partner market

is turbulent

General counsel role is

broadening

Partner income flattened

or fell

Outsourcing trend growing

Some work being lost to in-house

lawyers

Retaining more and better

work in-house

Increased recognition for corporates

Firms feeling pressure to cut fees

Investment in technology and innovation

Companies becoming more flexible

New entrants are disrupting local markets

Demand for lawyers with 3 to 6 years’ experience


State of the market

UK, Asia and the Middle East

London

AREAS IN DEMAND GLOBAL MOVEMENTS

Sydney

Melbourne

Corporate & Commercial

Corporate & Commercial

Property

Banking & Finance

Financial services

Property

Employment & Industrial relations

Media

Infrastructure & Projects

Technology

Health & Pharmaceutical Opportunities still plentiful in

UK, Asia and the Middle East but London not as popular

International secondments and rotations have become more

commonplace within global firms

Global instability and tighter visa rules has reduced movement in and

out of Australia

Lower tax rates attract lawyers to Singapore and Hong Kong


MARKETLaw firms are pressuring partners to perform, and offering less leeway in the case of a bad year. On the flipside, firms are eager to reward successful partners to retain them and ensure they are not poached by another firm. In the aftermath of the Herbert Smith Freehills/ White & Case partner poaching and subsequent litigation, the current partner market is turbulent. Movement continues at individual and team level.

On the ‘push’ side, the motivation is usually one or more of these factors:

• dissatisfaction with centralised management;

• lower-than-expected partner draws;

• co-efficient inequities;

• lack of recognition (financially or otherwise) of exceptional performance;

• conflicts (where ‘their’ client loses out).

On the ‘pull’ side, partners are attracted by:

• a more nimble environment;

• a new international entrant that offers genuine prospects of global collaboration;

• the opportunity to make their mark without ‘baggage’;

• exposure to better clients, bigger deals;

• more money in the short or long term.

Where ‘bulk’ partner movement occurs, we also observed firms responding with more vigorous application of restraints.

Mid sized firms are finding it harder to compete for large commercial deals, although tend to make up for this by billing well in specialist areas such as construction.

REMUNERATIONThe trend of trimming equity points continues this year: moving equity partners to fixed draw or salaried partnership, moving partners to consultant or counsel status or moving them on. Despite these efforts to cut costs and secure the pie for remaining partners, partner income has generally flattened or fallen this year, particularly in the smaller global firms, who struggle for a place between the big name global firms and the lower overhead mid sized and boutique firms.

Partners

Mid sized firms are finding it harder to compete for large commercial deals, although tend to make up for this by billing well in specialist areas such as construction.


RECRUITMENTSome notable ‘bulk’ movement occurred this year, with the Herbert Smith Freehills projects team in Melbourne and related partners in Sydney and Asia moving en masse to new entrant White & Case.

Another trend was the recruitment of one or two partners for carefully considered strategic reasons such as:

• boosting skills in key areas such as mergers and acquisitions and projects;

• offering a different choice to clients in terms of style and approach;

• adding clients in new industries;

• enhancing Asia Pacific service delivery.

RETENTIONIncreasingly, firms find it difficult to engage their senior employees as partnership prospects fade. Many senior associates remain in the firm, not necessarily from a desire for partnership but because prospects for movement are limited.

Nevertheless, partners themselves are more willing to try their hand in a new firm or explore options outside private practice. Desire for change tends to outweigh opportunity, although some high profile partners have moved into general counsel and ‘general counsel plus’ roles this year, with a seat at the executive leadership table and responsibility for more than the legal function.

As more foreign firms with deep pockets enter the Australian market, resident firms are looking for innovative ways to retain highly valued partners. Strong leadership from the managing partner is more important than ever.

Partners

Increasingly, firms find it difficult to engage their senior employees as partnership prospects fade.


Partners’ Remuneration

SYDNEYMode

Major Firms $1,250,000

Mid Firms $890,000

Small Firms $465,000

MELBOURNEMode

Major Firms $1,150,000

Mid Firms $740,000


BRISBANEMode

Major Firms $970,000

Mid Firms $615,000


PERTHMode


Mid Firms $655,000


ADELAIDEMode


Mid Firms $412,000


The defining criteria of what is a major, mid and small commercial CBD firm includes: size, locations, reputation, quality of work, expectations of employer as well as pay, desirability of employment and training and development.


MARKETFirms continue to compete for commercial work, with mid tier firms (including the smaller global firms) finding it harder to compete with the big name globals, new entrants from the US and nimble firms that are offering more innovative fee structures and service offerings. There has been rapid growth and development in the legal services market throughout Asia and Australia.

Firms report that client loyalty is harder than ever to win and retain and that in-house lawyers are doing work that once would have been referred to the firm. Companies are more likely to look at alternatives. They are willing to approach smaller firms, as well as new law firms with lower overheads, and are showing a tendency to ‘unbundle’ work. As such, competition remains fierce among private practice firms.

‘New law’ firms are no longer novel. More large law firms have opened contract hire subsidiaries, with some applying senior lawyers to these ranks to achieve better utilisation. Firms are increasingly reluctant to provide secondee lawyers to their corporate clients, although demand for these remains high. A firm’s contract hire offshoot can assist in this regard.

Within the firms, the path to partnership is slower than ever. Many solicitors and senior associates are disillusioned by the lack of prospects and look to move to an in-house or non-practising role. Most senior associates in the very large firms have no practice to take to another firm (and in any event partnership prospects at the new firm may be equally dire), and can be too expensive or too experienced for an in-house role.

On the bright side, a few major firms have recruited senior associates without a practice in areas of great need such as finance, mergers and acquisitions, funds/financial services and construction.

Fortunately, opportunities have opened up a little for senior private practice lawyers seeking a change. Increasingly they are regarded as highly attractive candidates for non-executive directorships, CEO and senior government roles. Management consulting, participation in start-ups and quasi legal roles also attract many lawyers.

INNOVATION A key driver for sophisticated law firms is innovation and more thought, time and money has been spent this year on this strategic focus. While much innovation is linked to technology, innovation as an objective is more nuanced now, and often includes strategy, culture, profile, competitive positioning, client service and employee satisfaction.

The appointment of ‘innovation managers’ and teams is growing, as are innovation projects, ‘design thinking’ experiments, and collaborative research and development exercises. Larger firms aim to inculcate their culture with an innovation theme, to involve lawyers of all levels in innovation workshops and online ideas boards, for example, and to make innovation a normal part of working life for their staff.

Innovation is adapted to suit the culture, strategy and purse of the law firm. Client needs (and sometimes client involvement) is top of mind. Testing of hypotheses, measurement of outcomes, and continual improvement – concepts that are not new to other industries but may be strange and new to the legal profession – are increasingly being applied, often led by innovation professionals from backgrounds outside the law.

Effective innovation is adapted to the practice area: process improvement , for example, will be different for a highly commoditised practice compared to, say, complex litigation or transactional practices.

Private Practice Lawyers


REMUNERATIONMost firms have applied increases of CPI or slightly above. The average national increase is 3.5%.

Bonuses tend to be linked to billings over budget, although exceptional performers may receive a bonus of up to 20%.

Some lawyers with 3 to 6 years’ post qualification experience in the larger firms enjoyed increases of 7–10%.High-achieving senior associates in similar sized practices were awarded increases of up to 10%, plus a bonus.

RECRUITMENTAreas of demand this year have centred on construction and infrastructure (especially front-end), property, competition, IT, banking and finance, wealth management and general commercial including business structuring and trusts.

Skills shortages mean that New Zealand qualified and interstate candidates are more readily considered than in other years, although property is still one area of law where local (state) experience is usually regarded as essential. Recruitment of overseas qualified lawyers has diminished as visa rules have tightened.

Demand remains highest in New South Wales and Victoria with other states stable (Western Australia, Queensland) or declining (South Australia).

RETENTIONLifestyle is still an important driver for law firm employees. Smaller teams under a partner in the larger firms are feeling more pressure and are less

attracted to the ‘carrot’ of partnership than ever before. On the plus side, the quality of work tends to be higher at an earlier stage for solicitors in lean teams with plentiful work.

There tend to be fewer levels of seniority between partner and junior lawyer so direct partner and client contact can also come earlier. Against this, some clients only want to deal with the partner, and competition for clients and deals mean that most firms will oblige. One US firm commented that its terms of engagement with a corporate client specifically state that ‘junior lawyers will not be charged for.’

Vacancy rates for junior to mid level lawyers remain high, with particular demand at the 3 to 6 years’ post qualification experience level. Firms find it hard to differentiate their value proposition to persuade these lawyers to join them. Mid level lawyers are sceptical about firms’ points of difference and are reluctant to change unless they are unhappy with their current firm. Many ‘stay to become SA’, keen to achieve the status and pay increase that comes with promotion, before making a change.

At this level, solicitors are inclined to try their hand in an in-house role, seeking more predictable hours, no budget pressure or time sheets. Others seek experience overseas and find that high quality Australian lawyers are still attractive to employers in the UK, Middle East and Asia.

Law firms are increasingly offering benefits to retain lawyers at these levels. Flexible work hours, four-day work weeks or a nine-day fortnight are more common, although flexible work arrangements usually need to be earned. Availability of part time roles is very limited without a history of service with the firm.

Private Practice Lawyers


Private Practice Lawyers’ Salaries

Major firmsSYDNEYYear Level Range Mode

1 $78,000 – $109,000 $88,000

2 $86,000 – $115,000 $96,000

3 $90,000 – $125,000 $106,000

4 $98,000 – $140,000 $127,000

5 $114,000 – $165,000 $135,000

SA 1 $140,000 – $185,000 $150,000

SA 2 $148,000 – $219,000 $168,500

SA 3 $165,000 – $225,000 $188,000

SA 4 $170,000 – $243,000 $212,000

SA 5/SC $197,500 – $340,000 $250,000

MELBOURNEYear Level Range Mode

1 $70,000 – $100,000 $78,000

2 $78,000 – $107,000 $82,000

3 $80,000 – $120,000 $96,000

4 $90,000 – $135,000 $120,000

5 $100,000 – $140,000 $125,000

SA 1 $120,000 – $155,000 $135,000

SA 2 $130,000 – $170,000 $150,000

SA 3 $137,000 – $180,000 $162,000

SA 4 $165,000 – $210,000 $180,000

SA 5/SC $170,000 – $310,000 $225,000

Given that firms take into account a range of factors when determining remuneration, an individual’s position within a band will vary based on their background,experience and performance. Lawyers paid at the higher end of the bands are usually top performers and/or employees who bring with them an additional skillthat is over and above the general requirements of the role. For tailored advice please contact our consultants.


Figures include superannuation but do not includebonuses or other benefits.


Major firmsBRISBANEYear Level Range Mode

1 $68,000 – $81,000 $76,000

2 $70,000 – $96,000 $83,000

3 $81,000 – $106,500 $88,500

4 $91,000 – $121,500 $97,000

5 $97,000 – $146,500 $116,500

SA 1 $117,000 – $160,000 $132,000

SA 2 $132,000 – $180,000 $156,000

PERTHYear Level Range Mode

1 $72,000 – $87,000 $76,000

2 $80,000 – $95,000 $85,000

3 $85,000 – $105,000 $97,000

4 $91,000 – $142,000 $112,000

5 $105,000 – $153,500 $123,000

SA 1 $120,000 – $165,000 $140,500

SA 2 $135,000 – $190,000 $158,000

ADELAIDEYear Level Range Mode

1 $55,000 – $68,000 $58,000

2 $60,000 – $78,000 $66,000

3 $65,000 – $85,000 $73,000

4 $75,000 – $120,000 $85,000

5 $80,000 – $130,000 $95,000

SA 1 $90,000 – $150,000 $115,000

SA 2 $96,000 – $200,000 $130,000






Mid firmsSYDNEYYear Level Range Mode

1 $68,000 – $84,000 $77,000

2 $82,000 – $100,000 $90,000

3 $92,000 – $110,500 $96,000

4 $97,000 – $128,000 $110,000

5 $105,000 – $148,000 $125,000

SA 1 $115,000 – $155,000 $140,000

SA 2 $130,000 – $165,000 $147,000

SA 3 $140,000 – $177,000 $162,000

SA 4 $155,000 – $185,000 $172,500

SA 5/SC $168,000 – $295,000 $210,000


1 $65,000 – $80,000 $74,000

2 $68,000 – $98,500 $79,000

3 $78,000 – $105,000 $88,000

4 $80,000 – $115,000 $98,000

5 $90,000 – $135,000 $115,000

SA 1 $107,000 – $143,000 $128,000

SA 2 $115,000 – $155,000 $138,000

SA 3 $125,000 – $165,000 $148,000

SA 4 $140,000 – $175,000 $160,000

SA 5/SC $150,000 – $280,000 $185,000






Small commercial CBD firmsSYDNEYYear Level Range Mode

1 $55,000 – $77,000 $60,000

2 $65,000 – $90,000 $70,000

3 $72,000 – $98,000 $82,000

4 $80,000 – $117,000 $90,000

5 $92,000 – $137,000 $110,000

SA 1 $98,000 – $160,000 $125,000

SA 2 $118,000 – $175,000 $130,000

SA 3 $132,500 – $190,000 $145,000

SA 4 $142,500 – $197,000 $155,000

SA 5/SC $162,000 – $210,000 $175,000


1 $48,000 – $73,000 $50,000

2 $55,000 – $85,000 $60,500

3 $57,000 – $90,000 $70,000

4 $60,500 – $105,000 $78,000

5 $75,000 – $120,000 $98,000

SA 1 $78,500 – $135,000 $105,500

SA 2 $105,000 – $145,000 $115,000

SA 3 $110,000 – $150,000 $125,000

SA 4 $120,000 – $170,000 $135,000

SA 5/SC $135,500 – $205,000 $165,000






Finance was a key area of demand and lawyers with project finance skills were particularly sought after. Financial services, regulatory and funds were also strong areas of demand. Contrary to previous years, demand was not as strong for mergers and acquisitions or dispute resolution lawyers.

Australian lawyers are keen to experience working overseas. London is a popular destination for those who can comply with visa restrictions, however, many now seek the less trodden path of relocating to projects hubs in the Middle East and thriving business destinations in Asia.

Opportunities abound for Australian lawyers in these areas, with attractive remuneration and typically smaller offices offering a greater variety of work than they might experience in specialist teams in the UK. While language skills are an advantage in Hong Kong and Beijing, they are no longer a prerequisite due to the number of expatriates doing business in Asia.

Australian lawyers are usually not concerned that their experience level will be discounted by two years when they relocate. In practice, they often receive higher remuneration and are given more responsibility than in Australian firms.

Relocation opportunities within global firms Now that Australian firms’ international mergers and alliances have matured, international secondments and rotations have become more commonplace. Aspirations of relocating within the firm’s network are more realistic in some firms than others and often depend on the support of local supervising partners.

Junior lawyers Magic Circle and Silver Circle firms are increasingly recruiting junior lawyers laterally. Lawyers from newly qualified to two years’ post qualification experience (PQE) find that they have options, particularly if their initial training is in areas of skills shortages, such as banking and finance. This means that Australian lawyers are marketable overseas with as little as two years’ PQE.

It also creates opportunities for junior Australian lawyers to enter specialised teams without specific experience in niche areas of practice. Lawyers who plan to return to Australia should be mindful of the applicability of specialist experience in the local market.

Salary informationSalaries in the UK, Middle East and Asia remain competitive. With the lower tax rates available in Singapore and Hong Kong, these jurisdictions remain attractive to Australian and New Zealand lawyers.

International

International opportunities for Australian lawyers were plentiful over the last 12 months, particularly in the UK, Asia and the Middle East.

Melbourne

Level 1, 535 Bourke Street, Melbourne 3000 T: (03) 9629 2111 E: [email protected]

Sydney

Level 3, 15 Castlereagh Street, Sydney 2000 T: (02) 9241 1199 E: [email protected]

@MahlabLegal

www.linkedin.com/company/mahlab-recruitment

www.mahlab.com.au

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