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How will a recession impact in-house recruitment?

The risk of recession has tipped from “possible to probable”, the Treasurer has said. This will, almost certainly, have repercussions for the legal services marketplace, including and especially those in corporate Australia.

user iconJerome Doraisamy 11 October 2022 Corporate Counsel
How will a recession impact in-house recruitment?
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The federal government is growing increasingly concerned, Lawyers Weekly’s sister brand Investor Daily reported last week, about the likelihood of a recession in major economies, with Treasurer Jim Chalmers signalling that the global economic outlook is “difficult”.

“The storm clouds are gathering again in the global economy, and that is not irrelevant to us,” Mr Chalmers told the media, following the Reserve Bank’s latest interest rate boost.

While Australia faces slightly less damning conditions, Mr Chalmers said that the local economy would not be spared if a global recession were to occur.


“I think the weight of opinion around the world is that the global situation has gotten much worse, even in the last few weeks,” the Treasurer said, alluding to surging inflation and the aggressive rate hike cycle adopted by many central banks globally.

While still fairly optimistic, the dark storm clouds have pushed AMP chief economist Dr Shane Oliver to slightly tweak his recession expectations, saying that the risk of recession in Australia now sits at about 40 per cent — up from 30 per cent back in August.

Dr Oliver acknowledged that “there is now a high risk of global recession which will impact Australia”.

“The 23 per cent plunge in global sharemarkets, falling commodity prices, central banks including the Fed willing to risk recession, the Fed’s record of tightening cycles ending in a crisis, the rising skittishness of financial markets, the deteriorating global growth outlook and domestically very low consumer confidence, and rapidly weakening housing indicators warn of much weaker conditions ahead, which will hit jobs and drive weaker inflation,” he said.

Turning to the Reserve Bank of Australia’s latest decision, he noted that “aggressively tightening into all this without pausing for breath risks knocking the Australian economy into a recession we don’t have to have”.

In light of such commentary, it is pertinent to ask what impact, if any, a recession in Australia will have on in-house legal recruitment — particularly given the “quiet-quitting” trend, as well as rising workloads for those in law departments. 

A lesser impact on in-house lawyers?

As the last few years have shown, G2 Legal Australian director Daniel Stirling pointed out, it is difficult to predict with any certainty what is around the corner.

If there is a recession, he told Lawyers Weekly, then it would clearly impact the legal recruitment market — “though potentially not as greatly as one may fear”, he added.

“The reason for this is that there are other factors at play in the current booming jobs market and talent shortage, rather than just economic growth. The current large number of vacancies is partly down to greater movement between jobs after many candidates put off career moves during the COVID period,” he said.

“This factor also contributes to the smaller available talent pool, as many lawyers at the junior to mid-level have moved overseas, again having put this off for the last few years, creating a shortage which isn’t being replaced by returning Aussies or incoming overseas lawyers.

“So, I believe it would have to be a deep and long recession to overcome all of these underlying issues and to have a real impact on the legal jobs market.”

Law departments to benefit from firm attrition?

Like the 2008 global financial crisis (GFC), and the years that followed, Carlyle Kingswood Global director of in-house legal and governance Phillip Hunter mused, the legal recruitment market will slow down if we experience a recession.

However, he stressed, this might not be felt with the same intensity across all areas of the legal market.

“During the GFC years, many law firms reduced headcount, a knee-jerk reaction that cost them dearly in the recovery years, and corporates increased their headcount by picking up displaced lawyers, which reduced external legal spend and increased internal legal knowledge and services,” he explained.

“Legal recruiters tend to feel the market contractions first; if a recession occurs, we could see a variety of changes including role cancellations or postponements, revised salary packages (down), and permanent roles changed to contract roles.”

These changes could be short-lived, Mr Hunter noted, if the market responds well to the measures employed by the government and RBA.

A shift away from a candidate’s market?

When asked if a potential looming recession would tip the scales back towards employers, and end the current “candidate’s market” (discussed here and here), Mr Hunter said: “In short, yes.”

“Employers will get back some of the negotiating power they feel they have lost over the past 18-24 months — both with existing and new employees. This won’t be limited to remuneration; management might feel empowered to revoke hybrid or flexible work arrangements, and bonuses will likely be affected. We will see a swing from employer value proposition to employee values (their) position,” he suggested.

Mr Stirling appears to support this, noting that he expects the result, in the short term, to be “more of a balance between employers and candidates, which could actually have a positive impact on the economy, rather than the current talent shortage, which exists in many areas”.

How to respond

Amidst such market turbulence and uncertainty, Mr Hunter noted, everyone should keep working hard for one another.

“There will be a more even balance between candidates/employees and the employers; the reciprocal relationship should become stronger and more important, because you can’t have one without the other,” he submitted.

“Candidates will need to be mindful of what they ask for during contract negotiation; those with unrealistic expectations (especially if they were met so the company could meet their needs at the time) could find themselves first out the door as employers look to reduce excessive human capital costs.

“Over the last two years, corporates have been forced to deviate from their structure salary bands to hire top talent in a candidate short market.

“A recession will see an increase in available candidates in the market, and corporates will become less motivated or flexible regarding remuneration as they realign to their traditional salary brands.”

Further reflections

Mr Stirling mused that he has worked in the Sydney in-house legal recruitment market since 2007, since when there have been numerous ups and downs, he noted.

“The Australian legal recruitment market has remained remarkably resilient throughout this period, and I’m confident that will be the case going forward,” he proclaimed.

“Candidates may benefit from speaking with an experienced recruiter in their specialised area while undertaking career planning during uncertain times. Likewise, hiring managers may also find that discussing market trends and movements with a recruiter in their sector may assist them in workforce planning and hiring and retaining the best talent.”

Mr Hunter backed this, adding that candidates and employees alike should “review their medium-term career ambitions; take a critical look to determine what is most important; and only change jobs based on finding something that satisfies those criteria”.

“Don’t simply move for a pay rise … be more strategic,” he advised.

Mr Stirling also suggested as much, noting that candidates should, as ever, consider where they want to take their career in the next few years.

“If they are contemplating a move, then it may be worth pursuing that more strongly, given that conditions may not be as favourable in the next period. That said, I would still expect there to be enough opportunities around, so no need to panic,” he posited.

“For employers, the market remains tight and candidate-short, so it remains important to stand out from the crowd, consider what candidates really want and to move quickly to secure the best talent. I don’t expect these requirements to change dramatically for some time.”