There was a high level of competition between firms, which offered big bucks to secure talent, and salary offers increased substantially — this trend was seen across Australia’s major cities, explained Mr Paluch.

Earlier this year, there were salary offers of $180,000 to $195,000, including superannuation for lawyers with four to six years of post-admission experience, and senior associates were routinely being offered $250,000 to $300,000, including super, Mr Paluch illuminated.

Australia’s legal sector has started to see falls in revenue, accompanied by rising expenses, the Australian Financial Review reported, based on Thomson Reuters’ Law Firm Financial Index report.

The largest falls in demand were seen in dispute resolution or litigation (11 per cent fall), banking and finance (9 per cent fall), and merger and acquisition (18 per cent fall). 

The newly released global report by Thomson Reuters has mapped trends in the legal industry across the globe that mirror what is being seen in Australia. 

“Law firms are finding themselves squeezed by both slowing demand and rising expenses,” said Mike Abbott, head of the Thomson Reuters Institute. 

“It was all very well to be earning huge money when the market was booming,” Mr Paluch posited, “but when it gets a little quieter, which is starting to happen this year, and you’re still earning such a big salary, there might be a target on your back”. 

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“If you’re a very good lawyer, and you perform, and you can continue to justify your employment, you will be fine,” he said. “But if you’re being paid a salary [that] was outside of all objective criteria as being considered reasonable, then your law firm may be looking at you when it is considering reducing costs. This applies particularly at the more senior level.”

“Those who made moves for the financial gain are the ones who are going to lose their jobs first — the overpriced lawyers,” posited Jesse Shah, director at nrol.

“Some people are saying junior lawyers will be the first to go in recession, but that may not be the case,” he illuminated. “A lot of partners aren’t thinking of the junior lawyers; it’s first and foremost: who’s overpriced? Who’s delivering?

“If you overpriced yourself knowing that firms are going to compete for your skill set, and then pay you that 10 per cent more than the market rate, come recession, you are extra cost — you might be the first person to go.”

Salary offers in decline

“In the last couple of months, [salary offers] have started to come back down, but there are still plenty of vacancies at many law firms in different areas of law,” noted Mr Paluch.

“The firms who were competing for those people have realised they can’t keep up with those salaries,” explained Mr Shah.

Firms have begun to realise, “we can’t keep paying these ridiculous 10 to 15 per cent above-market rates, because that’s when we won’t grow, our cost by head is going up too quick[ly], and our fee to our client is staying the same — we can’t sustain this model.”

“I’ve also seen a decline in trying to outbid your competitors. Collectively everyone has realised, ‘if we lose out to another firm, so be it; we have to be realistic in our expectations’,” Mr Shah noted. 

Advice for candidates

“It’s about being realistic in your move and your expectations,” Mr Shah advised. “Even though it’s your market as a candidate, you have to be realistic when you’re making a move.

“With more money comes more pressure — you’re expected to do a lot more,” Mr Shah explained. “People weren’t really moving for the right reasons. People were moving for oversold sales pitches, oversold jobs that weren’t real, and then you’d see them then drop out after three months.

“You have to look ahead at what’s about to come,” he suggested. “If you’re realistic with your approach, then come recession, you’re not going to be the first to go.”

The Thomson Reuters report suggested that firms are avoiding making widespread layoffs and are instead adopting a “wait-it-out strategy” — continuing seasonal hiring and absorbing the costs of taking on more talent and expenses. 

This may be because firms are recalling the difficulty of rehiring lawyers following the widespread layoffs made in response to the 2008–2009 financial crisis, the report suggested.