Judicious hiring helps law firms survive Covid

Australia’s large and domestic law firms have been hiring non-partner fee earners in the past six months at a higher rate than the previous period.

Strength in the numbers may help law firms thrive through uncertain times.

No one ever expects a calamity, but being in a strong position to weather a calamity is prudent, whether that strength is by design or happy coincidence.

Australia’s large and domestic law firms have been hiring non-partner fee earners in the past six months at a higher rate than the previous period. They are now well positioned to assist their clients through the legal minefield of the pandemic era and thrive. The Australian Partnership survey results inspire cautious confidence for lawyers in these uniquely unpredictable times.

For at least two years, and prior to COVID-19, the Australian legal market experienced a rare convergence of strong demand in transactional and disputes work. Fed by strong global markets, inbound investment, major infrastructure projects and the fallout of several royal commissions, a “lawyers’ picnic” has been at play.

Partner profits grew by double digits and a further rise was hampered only by the global talent vortex. Aussie-trained talent was sought out by magic circle and white shoe firms in London, New York and the Asian markets, decimating the local Australian market for experienced associates. Local firms could not compete with offers in excess of $US200,000 for junior lawyers in Hong Kong or New York.

The firms that could win in the “war for talent” were best positioned to attract and retain the best work. In the survey results for the past six-month period many large and domestic firms have been winning.

Allens Linklaters, King & Wood Mallesons, Gilbert + Tobin, Johnson Winter Slattery (JWS), Hall & Wilcox, Holding Redlich, Russell Kennedy and Arnold Bloch Leibler have increased their non-partner fee earner headcount by an impressive 13 to 19 per cent. Global firms have largely remained stable except for an outlier, Clyde & Co, which achieved a remarkable 50 per cent growth in their Australian engine room, while KPMG Law has added 29 per cent in non-partner fee earners.

For the top eight firms and larger national practices, a policy of increasing graduate numbers to hedge against the loss of talent to global markets had been in place for a few years.

The successful increases are apparent in the last four periods of the survey, since 2019. Although slightly down (by around 50 grads overall for the recent six months), the numbers are still strong with 1160 graduate positions among 40 firms. Notably HWL Ebsworth had the highest intake at 120 (up 20), followed by Ashurst with 104 (adding 12) and Hall & Wilcox and Norton Rose Fulbright added 10 each. Reduction in numbers were notable at Herbert Smith Freehills (down 21), Gilbert + Tobin (down 13) and Minter Ellison (down 23).

Partner increases during the period surveyed averaged only 1 per cent although domestic firms showed 4 per cent growth.

Johnson Winter Slattery, Mills Oakley, and Keypoint Law grew by six, seven and six respectively. Large firm HSF added eight partners and Clayton Utz five. Minter Ellison (minus nine) and Norton Rose (minus 10) were net losers. International Clyde & Co added six partners and Seyfarth Shaw was up 11 per cent, while most internationals remained stable.

The overall positive trend of the survey figures is encouraging, given that three months into the pandemic crisis there is very little evidence of major redundancies hitting the Australian legal market.

Unlike the reaction to the GFC, partnerships are shouldering a share of the burden of financial stress this time around. At least initially it seems firms are taking a measured view, supporting their employees rather than forcing redundancies.

It would be a brave call to predict trends with the level of uncertainty throughout the business community and on the geopolitical front.

In conversations we at ECP Legal have had with managing partners in large firms, internationals and domestic mid-tiers on the list over the past few weeks, they are reporting profits have stayed up during the period and work pipelines have not dropped off as badly as expected. They are cautiously exhaling and taking a deep breath of gratitude as they enter the next period in a position of relative strength.

The only certainty is that the ongoing pandemic environment will involve continuing legal work. There is an expectation of increased legal work in areas created by COVID-19 regulations and responses.

With a fresh army of talented experienced fee earners and graduates the growth firms are well-positioned to service their clients better and maintain profitability while there is work to be done — the silver lining of the calamity in play.

Shaaron Dalton is a partner with ECP Legal.