The October-December Hays Legal Quarterly Report has confirmed that the legal recruitment market is healthy but tight, with a growing list of skills in short supply, both in the in-house and private practice markets.

"Australia's job market is healthy as businesses ramp up their hiring activity," said director of Hays Legal, Darren Buchanan. "Activity in some areas is now back to the levels we saw just prior to the global financial crisis hitting Australia ... the cloud above job security may have gone, but we're bracing for a storm for skills."

The shortage of available talent and the high demand for in-house lawyers has caused in-house employers to make quick recruitment decisions, juggling their schedules and organising meetings with stakeholders simultaneously so they can secure the top talent.

Similarly, to become more competitive, law firms are introducing incentive schemes such as strong learning and development programs to reward high performers, without over-committing base salaries.

Within the in-house market, the report revealed strong demand for banking and finance lawyers with top-tier experience. In particular, there is demand for those making their first move out of law firms with between three and five years experience. As Australian organisations start to handle a higher number of corporate and asset financing transactions, they have begun to bolster their legal teams creating vacancies within the banking and financial services sector.

The private practice market is getting tighter, with high quality candidates in short supply as the anticipated rise in candidate volumes following the July salary reviews did not eventuate.

Demand for private practice lawyers in the commercial and corporate space has increased gradually throughout 2010 and demand for candidates with skills in public and private M&A and equity capital markets will continue to remain high.

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Traditionally counter-cyclical, the litigation, insolvency and insurance areas remain very busy despite improvements in the economy, with candidates often receiving multiple offers.

In the upcoming quarter, the report predicted an increase in the number of in-house vacancies as confidence returns to the recruitment market. For private practice, recruitment activity will remain stable in the next quarter.