Recruiting in Legal has increased dramatically in 2021 with demand for candidates reaching all time highs across both the In-house and Private Practice areas.
Private Practice
Private Practice demand has been especially strong amongst the transaction teams with M&A and Structured finance associates being poached by Magic and Silver Circle law firms with accompanying large increases in compensation. The US law firms continue to outstrip the UK firms in terms of salaries for key areas with some 3rd or 4 th year associates earning £200 K + salaries. We are now beginning to see NQ Associates at Magic & Silver Circle firms being paid six figure starting salaries. Further to this Associates at the 2-3 years PQE level have seen salaries increased with some firms paying a Covid bonus. At the moment this upward increase on salaries looks set to continue into 2022.
Many Law firms have now adopted flexible working, which is proving very popular with those below Partner level. This has gone hand in hand with a marked increase in billable hours and the upshot is that whilst Associates are being paid as never before they are in general working longer hours and this is creating issues with burn out.
Investment Banking
Demand for Banking lawyers has increased dramatically, key areas of demand are:
- Prime Brokerage
- Derivatives
- Structured Finance
- M&A
- Regulatory
Regulatory is an interesting case as demand for stand along Regulatory lawyers has increased markedly over the past few months with firms hiring across all entities.
Private Banking & Wealth Management
There has been increased hiring for Lawyers within Regulatory and Products particularly concerning Funds and Structured Finance. This is a key area of growth and we expect to see more demand for Legal Counsel, Paralegals and Company Secretaries in this space going forwards.
ESG
In common with other areas of FS demand for Lawyers with ESG experience has been increasing and we have begun to see firms hiring ESG specialists for the first time. Since ESG is a relatively new area this has opened opportunities for Legal Counsel who have been developing an interest and speciality in the area. There has been a surge in interest from candidates with many seeking to switch from their specialisms and move into ESG. Academic courses with an ESG focus are proving popular and this coupled with the increased potential for flexible working has meant that more lawyers are able to take these external courses to up skill.
Investment Management
The Public funds area has seen a sharp increase in demand for legal counsel particularly for those with UCITS experience as UK based firms need to establish funds in Dublin or Luxembourg to sell funds in Europe post Brexit. There has also been a demand for Fund Distribution Lawyers as well as an increasing demand for Regulatory Legal Counsel. This has created a shortage of qualified legal counsel notably in the 4-8 years PQE range. A number of Asset Managers have been offering training contracts and we are starting to see a number of lawyers qualify in-house in AM via this route.
Private Funds Legal Counsel area also in demand, the talent pool here is much smaller though and this has created issues in finding suitably qualified candidates.
Private Equity & Hedge Funds
Demand here has been increasing particularly with Leveraged Finance and other Funds related areas. Legal Counsel here tend to be more hands on and transaction focused is this is reflected in the higher compensation levels on offer. The counter point to this is that the structures tend to be flatter and so there is less potential to move into a management role.
We have seen a marked increase in demand for candidates with CLO experience as this market has been very active in 2021 the number of qualified candidates here is quite low, however, which can create issues for firms looking to hire in this area.
Insurance
The Insurance Market has been extremely active across all areas during 2021 with legal no exception. Demand for Claims Lawyers and Litigation Lawyers has increased markedly especially in the London market. Across the Regions a number of Insurers have been hiring steadily with a focus on flexible working with location also being flexible.
Company Secretarial
2021 has seen a market increase in the number of Company Secretary or Assistant Company Secretary roles across FS. Demand for subsidiary governance specialists is very high, minuting and board management experience is highly sought after. Candidates in this area who are fully or part qualified via ACIS are sought after for permanent or temporary roles as firms seek to add headcount and support in this area.
Corporate & Commercial
There is always a constant requirement for candidates in this area, the skill set is very transferable and Commercial Contracts specialists are frequently sought after for interim or FTC roles.
We have seen an increase in roles for both skill sets, Commercial Legal Counsel with Strong contracts experience are being sought after as firms are grappling now with a wide range of agreements that need to negotiated and completed due to the general upturn in FS business. In contract to Q1-Q2 compensation has become to increase in this area.
Europe
Dublin and Luxembourg continue to be very active in terms of the legal market. Demand for Funds Lawyers has soared, particularly in Dublin. This has created a shortage of qualified legal counsel and paralegals in this market particularly in the areas of fund set up. The Luxembourg market continues to grow with a demand for Luxembourg or French qualified Lawyers strong. The Corporate Associate market is also very active in Luxembourg. Elsewhere across Europe we continue to see strong demand in Frankfurt, Paris, Amsterdam and most recently Italy.
Back to the office / WFH
With the relaxation of Covid restrictions and the vaccine program there is a general trend of firms seeking to bring employees back to the office with some firms moving at a quicker pace than others. Generally firms are offering a 3 days in / 2 from home or 2:3 solution which seems to be the preferred option for the majority of candidates that we speak with. There are firms who are requiring a full return to the office which is not proving popular in general with existing staff or prospective candidates and in our view a flexible working policy is going to be a key element both in attracting and retention of the best candidates going forwards. There are very few who wish to return to 5 days a week working in the office.
Visas / Cross border working issues.
Post Brexit the visa situation has become critical in the UK. UK firms have been clamping down on employees who have been working remotely from another country as there are now significant tax liabilities for employees who are not based in their home locations. European regulations mean that those who cover European clients must be based in Europe. As most firms now have internal log ins and portals they can track where employees are logging in from. In most cases it is no longer possible to be based in Europe and work in London where the role and headcount is UK based. Employees will need to be based in the UK.
In general FS firms have proven extremely reluctant to provide visa sponsorship in contrast to Law firms who have large number of employees working on Tier 2 visa. The UK’s new point-based visa system should enable firms to provide visas to employees via a simplified process. We have seen some of the larger firms establish internal HR teams to provide specialist support in these areas whereas some of the smaller firms are less likely to do so. It will prove to be a significant competitive advantage for firms that can work within the new visa rules to secure the most well qualified candidates.
Contracting & IR35
The contract market has remained buoyant and we are seeing an increased number of longer-term interim roles particularly in the Funds & Company Secretarial areas. The change in IR35 rules means has resulted in a shift towards: Daily Rate PAYE roles where candidates are paid via an umbrella company with income tax etc deducted art source. FTC roles where candidates receive salaries, benefits and in some cases bonuses akin to a permanent employee are the other option that firms look at. One point to note is that firms are no longer permitting contractors to be based outside the UK & working remotely. This is for tax and reporting reasons.
Compensation – Increasing
- Since the start of 2021 compensation has been increasing across the board for Legal Counsel, Paralegals and Company Secretaries in Financial Services.
- Base salaries have increased by 10 – 20 % for some areas in demand with more candidates seeing salaries in the low 6 figures at a much earlier stage in their careers.
- Areas in the most demand are: Investment Funds, Derivatives, M&A, ECM.
- It remains to be seen whether bonuses will be increased by the same factor as we go into the end of year bonus round but the strong upward pressure on base salaries is likely to continue.
- Private Practice – as previously noted compensation has been on a steep increased within the top tier Private Practice firms for teams that cover FS in particular. Base salaries have seen a steep in increase of as much as 20 – 30 % year on year for some areas in high demand.
Looking ahead
As we go into Q4 we are continuing to see a strong demand in hiring at all levels but the most sought after candidates in legal are in the 4-8 years PQE range i.e. VP level at most Banks. Compensation levels will remain strong as base salaries once increased are unlikely to be reduced (witness the increase in base salaries post- Lehman shock) whereas bonuses can be adjusted to reflect market conditions and financial performance.
Flexible working will continue to pay a key part in decision making from Candidates and firms that offer a flexible approach will be best positioned to attract a) a wide range of candidates b) a higher quality of candidates.