The in-house legal recruitment market slowed somewhat in Q2 and we saw a reduction in new roles. Once we got into Q3 we saw a pick up in roles and the summer months were back at Q1 levels. We have continued to see the overall increases in Salary levels on the Private Practice side being mirrored by an increase in in-house salaries as firms struggle to keep pace. One point to note is that there has been an increase in cases of lawyers moving from Private Practice to an in-house role and accepting a reduction in base salary.
Private Practice
Private Practice firms have continued to hire strongly however there is some evidence the economic climate has been affecting teams in the transaction area e.g. M&A / CLO/ ECM / DCM and there has been a reduction in deals in these teams. This has not yet begun to impact the hiring market but may well dampen demand from Private Practice firms as we go into Q4. Compensation has continued to rise with salaries for 3rd or 4th year Associates climbing past the £200K mark at the larger US firms. Magic & Silver Circle firms are now paying NQs well into 6 figures with experience Associates earning base salaries in the £140 – £170 range.
The flexible working model is proving to be very popular at Law firms with those below partner level. Burnout continues to be an issue with as noted above an increasing number of Associates looking to move in-house and trading the work-life balance for a lower salary.
In-house
Investment Banking
Demand for Banking lawyers has continued to be firm, key areas of demand are:
- Prime Brokerage
- Derivatives
- Structured Finance
- Corporate
- Regulatory
- Commercial
Prime Brokerage & Collateral Management has continued to be an area of growth for the major players in this market with several firms seeking to hire lawyers with Prime Services or Securities Lending backgrounds. The number of experienced lawyers in this space is still quite low, however, and there is a need for more junior lawyers to be trained in this space.
In-house corporate has remained strong with demand for experienced corporate lawyers. We have seen demand for M&A lawyers tail off in the past few months which may be due to the reduction in deal flow.
Demand for Commercial Lawyers has remained steady, this is a readily transferable skill set & candidates can move between different industry sectors. We have seen some demand for Data Privacy Specialists emerging particularly for experienced lawyers.
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
The demand for Lawyers with ESG experience has continued to increase and we have continued to see both sell and buy-side firms hiring ESG specialists. These can vary from horizon scanning policy type roles to more hands-on implementation and Regulatory roles. This has opened opportunities for Legal Counsel who have been developing interest and speciality in ESG. There has continued to be 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 can take these external courses to up-skill.
Investment Management
We have seen an increase in demand for AIF / Private Funds Legal Counsel across the more traditional asset managers as well as the more specialist boutique firms. The talent pool here remains smaller in comparison to the Public funds’ area and our searches have tended to focus more on the Private Practice area to find suitable candidates. It is noticeable that law firms have stepped up their hiring and training in this area and we are beginning to see a large number of lawyers qualifying as NQs in these teams.
The Public Funds area has continued to a sharp increase in demand for legal counsel, particularly for those with UCITS experience as UK-based firms continue to establish & manage funds in Dublin or Luxembourg to sell funds in Europe post-Brexit. There has also been a demand for Fund Distribution Lawyers with IMA experience as well as increasing demand for Regulatory Legal Counsel.
Several Asset Managers have been offering training contracts and we are starting to see several lawyers qualify in-house in AM via this route.
Private Equity & Hedge Funds
Demand here has remained steady with Leveraged Finance and other Funds related areas. Legal Counsel here tends to be more hands-on and transaction focused is this is reflected in the higher compensation levels on offer. The counterpoint to this is that the structures tend to be flatter and so there is less potential to move into a management role.
Company Secretary & Corporate Governance
Following on from Q2 we highlighted the overhaul of the corporate governance and audit landscape published in May 2022 “Restoring trust in audit and corporate governance”. This comes as a response to the sudden financial collapse of “big businesses” such as Thomas Cook (2019), which became financially distressed not long after receiving clean bills of health from their auditors.
With these new reforms, the government wants to reinforce the UK’s reputation as a world-leading destination for investment and to set a standard globally for corporate governance, risk management and corporate reporting.
We have seen the effects of this on recruitment with companies striving to attract top talent with increased salaries this year. Qualifications are key and are becoming a mandatory requirement for Senior positions. There is also a desire for candidates with additional skills such as a background and degree in law; experience in transformation projects or strong system IT skills.
Hiring managers for Senior CO Sec positions are seeking strong leadership skills to follow through on long-term projects and ensure successful deliverance. The financial services market has moved away from short terms fixes and firefighting that we saw throughout COVID and shifted back to long-term goals. Poorly executed projects can be costly and with tighter controls coming into play and ESG still an ever-growing focus for companies, the right hiring becomes increasingly important.
Diversity and female representation is getting better! The FTSE Women Leaders Review (“WLR”), recommends a minimum of 40% female representation on boards by the end of 2025. Although not mandatory, it is great to see this change happening and companies becoming more accountable.
One particular area we have seen a huge churn this year is the investment trust sector. Hiring companies have struggled to attract talent in this niche area. Companies have resorted to internal promotions when unable to attract talent on tight budgets. There is also a new trend for candidates looking to leave the investment trusts sector for a more generalist role adding to this increasing talent short market.
Company Secretary recruitment, in general, has started to slow down after an exceptionally busy summer of 2022.
Europe
Dublin and Luxembourg have continued to be active in terms of the legal market. Demand for Funds Lawyers & Company Secretaries remained strong in Dublin. This has created a shortage of qualified legal
counsel and paralegals in this market, particularly in the areas of the 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. We have also seen demand amongst UK-based Banks for German and French Qualified Legal Counsel to work in the UK creating a fund and structured products for EU-based distribution.
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 taking a stricter policy than others. The consensus seems to be for 2 days in the office & 3 days at home which is the preferred option for the majority of candidates that we speak with. Some firms are requiring a full or 4 days out of 5 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 are UK based. Employees will need to be based in the UK.
The UK’s new point-based visa system is enabling 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 or Umbrella where candidates are paid via an umbrella company with income tax etc deducted from art source. FTC roles where candidates receive salaries, benefits and in some cases bonuses akin to a permanent employee are increasingly becoming a favoured option amongst candidates as they can receive full benefits including pension and in some cases bonuses as well. Firms are no longer permitting contractors to be based
outside the UK & working remotely. This is for tax and reporting reasons.
Compensation – Still increasing but for how much longer?
Since the start of 2022 compensation has continued to cross the board for Legal Counsel, Paralegals and Company Secretaries in Financial Services and Private Practice.
In–house base salaries have increased by 20 – 25 % YoY for most areas with candidates being able to move for large salary increases particularly in the AVP / VP space.
Areas in the most demand are Investment Funds, Derivatives, M&A, ECM, and Cosec.
Bonuses appear to have been more generous this year with firms paying generally at the maximum level they can: 20 %-30% of base salary has been the norm with some firms paying more than this. Bonus percentages do tend to rise in line with seniority and some D or MD level candidates will have seen bonuses in the 30-50% range.
Private Practice – as previously noted compensation has been on a steep increase within the top tier Private Practice firms for teams that cover FS in particular. Base salaries have seen a steep increase of as much as 20 – 30 % year on year for some areas in high demand. NQ salaries are now generally at the 100 K level with some firms paying more.
It remains to be seen how the wider Economic slowdown and market turmoil will affect compensation in the legal market. Law firms have increased compensation by 30 – 50 % and have also embarked on an aggressive hiring spree for the past 18 months. Fixed costs now are at an all-time high and with the reduction in deals in the market eg M&A / Primary Markets, a number of those expensively assembled teams are no longer as busy as they have been.
Looking ahead
The outlook for Q4 is one of reduced demand across FS and this will be the same for legal as some firms are looking to push new headcount and hiring into Q1 2023 as the appetite for adding new headcount in 2022 diminishes. Demand for key hires in growth areas will remain strong and there will be several replacements hires across businesses.
Flexible working will continue to play a key part in decision-making for Candidates and firms that offer a flexible approach will be best positioned to attract a) a wide range of candidates and b) a higher quality of candidates.