Legal sector following US and UK trends on evolving talent model

Australian law firms are pulling back from investing in junior staff and instead making more lateral hires of experienced lawyers echoing industry shifts in the US and UK, experts say.

A key recent shift in the US legal market has been the move towards more experienced lateral hires, as well as growth in two-tier partner structures and less emphasis on junior associate hiring, according to industry research.

Similarly, the UK has also witnessed more lateral partner hiring, a trend described as an influential growth strategy for law firms in the UK. Jason Elias, founder and CEO of Sydney-based legal recruitment firm Elias Recruitment, says he’s seeing similar trends in Australia’s legal market.

Elias has observed “some movement towards lateral hiring of experienced lawyers, particularly at the senior associate and partner levels, as firms seek to bolster specific practice areas and respond to client demand.” On partnership structures, he describes the growth of two-tier models at Australian firms as “pretty consistent.”

While some Australian firms have had both equity and non-equity partners for many years,  around 66 per cent of new partners at top tier firms are now being appointed on a part, or whole, salary basis, according to recent data compiled by the Australian Financial Review.

“Often salaried partnership is a way to try before you buy for both firms and ‘partners’ before getting into bed with the various complexities and risks that entails. Shareholding in ILPs (incorporated Legal Practices) has been the game-changer,” says Elias.

There are also trends in Australian hiring that is not evident overseas. Unlike the US, where many firms have pulled back on flexible work arrangements and Diversity, Equity and Inclusion (DEI) under President Donald Trump’s administration, Elias says Australian firms continue to put a focus on flexibility and hybrid working arrangements, as well as diversity and inclusion.

According to Elias, the drivers for these local trends include intense competition for top talent, client expectations, and a broader shift in workplace culture after the COVID-19 pandemic. “The ‘you must be at your desk’ genie is not going back into the bottle,” he says.

He points out that “[f]irms that are mandating full-time in the office will lose staff and any replacements may not be at the same quality. Good lawyers have choices and want flexibility especially if they are at a life stage with family responsibilities like children or elderly parents,” he says.

In the UK, Deepak Shukla, a spokesperson for London-based law firm Pearl Lemon, echoes Elias’ view on lateral hiring. He says there’s a bigger focus in the industry on bringing in experienced lateral hires “instead of loading up on junior associates”.

Shukla says that “[f]irms want people who can hit the ground running and bring specialised skills to the table.”

“Two-tier partner structures are popping up more often too, as firms try to juggle leadership needs with day-to-day operations. Meanwhile, junior associate recruitment is slowing down, with firms looking for candidates who can step up quickly to work directly with clients,” he says.

Back in Australia, Ryan Zahrai, founder and principal of Sydney-based Zed Law, has also noticed more firms pursuing experienced lateral hires over junior cohorts.

“Clients are driving the shift and firms are happy to accommodate it as a faster way to boost revenue and cut training costs,” he says.

Zahrai says that clients “… want experienced lawyers who can execute immediately, and they’re unwilling to subsidise training.”

He adds that, “[p]rofitability pressure means firms need to deploy capital efficiently – experienced laterals generate fees faster and with less supervision.”

“Junior associate hiring is flattening, particularly at mid-tier firms that can’t compete on Big Law salaries but also can’t justify the development cost when clients won’t pay for juniors to learn on the job,” he says.

According to Zahrai, the two-tier partner structure, equity versus non-equity is becoming standard, and is “mirroring the US playbook,” he says.

Partnership equity is being reserved for “genuine rainmakers” and high performers, while non-equity tracks let firms keep talent without diluting profits.

Feeding into the trend is fierce competition among firms for star performers. “It’s a talent war: poaching proven performers is now cheaper than building from scratch,” says Zahrai.

Another contributor increased moves between firms are “remote-first and flexible work models”, which Zahrai says are “reshaping recruitment.”

“For more nimble commercial firms, geography matters less, which means competition for top talent has intensified,” he says.

He adds, “[t]here’s also growing appetite for in-house counsel roles, driven by better work-life balance and equity opportunities at high-growth companies. Contract and fractional legal work is also expanding. Lawyers want flexibility, and clients want to pay for outcomes, not hours.”

By contrast, demand for junior staff is also being hit by Artificial Intelligence (AI) usurping their traditional roles. AI’s impact on law firm hiring is still unclear, although there are reports that US law firms are already considering slashing summer associate hiring due to AI’s speed and cost efficiency.

According to Zahrai, AI is replacing juniors on document review, research, and first-draft contracts which are now automated and historically accounted for 60 to 80 per cent of junior work. “Firms adopting AI aggressively, like us, are seeing more than 80 per cent of routine legal tasks handled by technology, with senior lawyers stepping in for complexity and client assurance. This means fewer bodies, but higher-value work per person,” he says.

Zahrai predicts that long-term hiring will shift to strategic and client-facing talent, particularly “people who can manage relationships, navigate ambiguity, and add commercial judgment.”

“The lawyers who survive and thrive will be those who leverage AI as a force multiplier, not those competing with it on tasks it does better and faster,” he says. He advocates for “lean teams, AI-first platforms, senior expertise where it counts.”

“The firms stuck hiring armies of juniors to churn time sheets are going to struggle as clients demand better, faster, cheaper,” he says.

He adds that “[f]irms are getting more selective; demand is for specialists and senior talent, not volume. Junior roles will stagnate unless firms can monetise training or see long-term return.”

Elias concurs and says that AI is already starting to influence recruitment as firms move to automate routine tasks and due diligence processes. He predicts the impact of AI to accelerate over the next 24 months, leading to more demand for lawyers with technological expertise and less demand for juniors. “AI will not replace lawyers but the lawyers using AI effectively will replace those who don’t,” he says.

Craig Du Rieu, managing director of Lawson Elliott Recruitment, says in the age of AI companies are on the lookout for junior staff with good interpersonal skills.

Du Rieu, whose company specialises in sourcing talent for the accounting and finance sectors, says the impact of AI on hiring is not huge at present but is flowing through to clients being keen to nab young workers who have good soft skills – attributes like communication, teamwork, and problem-solving.

In terms of AI’s impact on hiring, Du Rieu says, “I think it’s there in small components to make life easier but it’s certainly not replacing things hugely and there’s a long way to go with it.”

On the supply side, Du Rieu says it’s getting harder to find young talent.

He says junior candidates have a lot of options on the job front and there can be cultural challenges in adapting to law firm workplaces with many staff who are decades older.

“Often the quality is not there,” says Du Rieu and he points to the generational differences inside companies, including on workloads.

“It’s a different work ethic or alignment in that to what the people hiring them have, I think that’s been a real generational shift more than I’ve ever seen where someone in their early 20s today is so different to someone in their early 50s.”

Zoe Rathus, Associate Professor at Griffith University’s Law School, says students are having to position themselves strategically to enter an industry altered by AI.

Rathus says students are aware that firms want junior staff who are adept at using AI tools but also stand out for their non-technical skills.

“There is a lot of thinking about the fact that whatever role AI might be able to play, what humans bring to the practice of law is life experience, … the ability to empathise with clients, … the ability to bring an analysis to a situation which is quite different to anything that AI might do,” she says.

She adds that “[p]eople who have life experience … are going to become very attractive because law firms are going to have to be talking about what they as a firm bring to their practice of law – that human touch I presume is going to become more and more what they want to be selling.

“We’ve been encouraging students to understand that when they apply for a legal job that they need to be talking about their whole person.”