Once again, the past year has seen a number of changes within the legal sector in South Africa and with those changes come the accompanying changes to salaries. Below is our breakdown of salaries for the South African legal market.
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THE VIEW FROM PRIVATE PRACTICE
How was the legal job market like in South Africa?
Once again this year saw further introductions of international law firms into South Africa with the news that Pinsent Masons would be entering the local market afresh, while DLA Piper entered the market as an independent law firm for the first time.
At the junior end, there has and always will be movement with lawyers either shifting from one large law firm to another large firm with the hope of a change, or moving to an international firm hoping to gain more international exposure. We also saw the global trend continue where the so called “Big 4” audit firms are bolstering their legal services offering with PWC acquiring the boutique corporate firm Read Hope Phillips.
Looking at the hires over the past year; how has the market evolved?
As mentioned in my previous survey, I believe the local established law firms are having to relook at their business models and evaluate whether having a full service offering is the best business approach to take. Particularly as the competition from international firms with deep pockets aim to take market share in what is already a highly cramped and competitive market. There is some discussion now whether it is in fact necessary have teams of professionals to cover a full suite of service offering or whether it may be more beneficial to focus on one or two select areas and service outer ancillary areas of the law with less of a focus. It will be interesting to see how or if this strategy is implemented. If it is, don’t be too surprised if a number of new one to five partner boutique firms appear in the near future.
What happened to private practice salaries?
Once again, salaries in the South African market have taken their lead from the health of the local economy. A number of large firms were only giving inflationary increases and in some support roles the increases were not even at inflation.
There is always going to be the challenge of keeping star performers happy and in these instances there are instances of double digit increases, though these are often justified as being promotions rather than simple increases.
At more senior levels, there have been instances of salary freezes and/or a request from Partners to recapitalize the firm. This can and has led to some discontent.
What were bonuses like?
According to our market research within private practice, 34.06% of respondents indicated their firm makes provisions for a bonus, 33.79% said no bonus structure was in place while 32.15% of respondents gave no indication. Of the positive respondents, the overall majority (73.16%) considered the criteria for bonus to be challenging, 16.21% said it was easy and 10.63% of respondents said the criteria is impossible.
What have been the most active practice areas within private practice in the last year?
Once again banking and finance roles have been hotly contested by the various firms. There has however been a downturn regarding opportunities within projects largely due to uncertainty regarding the longevity of the REIPPP program. With the local economy still waiting for direction and stagnating, this once again saw, litigation/ADR perform well, which is quite common as companies seek to protect market share more aggressively.
What are the projections for 2017 for the private practice job market?
Again, we anticipate interest in litigation (insolvency and business rescue particularly) will remain high. We are also anticipating an upswing in M&A activity toward the end of 2017 carrying through into 2018. There are just too many companies sitting on ever increasing war chests and sooner or later shareholders are going to want to see something done with that capital. Perhaps the National Conference of the ANC in December will be the watershed moment?
What will be the specific growth areas?
In the short term, litigation and ADR, but in the medium terms we see corporate being active.
Will salaries rise?
Once again, we don’t anticipate a major rise in salaries. New entrants may push the market related salaries up in the short term, but by seeking the advice of local recruitment agencies we believe they should be able to attract the right talent by paying similar market related salaries. In the economic times we find ourselves, any double digit percentage increase should be considered a good increase.
According to the results of our survey, below are the expectations of current employees within private practice. As is shown, the lion’s share of individuals expected rises of 7.5% to 12.5. This can be justified in that this group are on the threshold of promotion from one tier to another. In instances like this, a greater than normal salary rise can be expected.
Our predictions are therefore in-line with the data we have collected.
In assessing where salaries may go in 2017, one needs to consider what salaries were for 2016.
In this regard, below are four graphs setting out the minimum, average and maximum for varying levels of seniority (years of post-qualified/articles experience, PQE) within large, medium to small and boutique firms.
In reviewing some of the graphs, please note at the more senior end of the spectrum it is not practical to give an upper range as the salaries can vary substantially. In such an instance it needs to be analysed on a case by case basis and one of our consultants will happily discuss this with you should you require such information.
Where are the best promotion opportunities for ambitious legal professionals?
For young ambitious professionals who are still able to choose a new direction, our advice would depend on the firm. If you are at one of the large traditional firms, the momentum is shifting even more so towards a corporate/commercial focus. If this is not an area of interest to you, then join a firm that has as its primary or secondary focus an area of law that you already specialise in or intend specialising in. There are options out there and we will happily provide you with guidance as to a likely best suitor.
Is 2017 a good time to move jobs in private practice?
Each year I am asked the same question and I guess the answer is very much dependent on the individual. If the individual feels that they are not growing in professionally, then a change can certainly help to re-energise and focus. Other instances are when a particular sector is under pressure and the probability for promotion is not too positive in the short to medium term. Whilst internal moves could be possible, be mindful of being called on by your former department to assist while still trying to make the shift into a new stream. This can cause issues with your new and old team.
THE VIEW FROM IN-HOUSE
How was the in-house & compliance market in South Africa?
At more junior levels, there was continued interest in varying sectors throughout 2016. However, at intermediate levels positions were less prevalent and were more often than not restricted to employment equity appointments only. Senior and heads of legal roles will always pop up throughout the year and this past year was no different.
What have been the most active areas in the past year?
At junior generalist levels, financial services are often looking for talent in legal and compliance. Regulatory and legislative changes affecting the likes of asset management and anti-corruption have also seen a new interest in these areas of legal and compliance, with some companies creating new desks to service these areas. This was particularly so for multinational companies having offices in Europe and/or North America. I anticipate this will continue to be an area of interest this coming year.
What were bonuses like?
Of all in-house respondents to complete our survey, 88.64% advised that provision is made for a bonus and only 11.63% saying no such provision exists.
Moving in-house is happening regularly; what can people expect in terms of salary when doing so?
Typically attorneys with 0 to 3 years PQE can expect a decent increase when moving from private practice to an in-house position across sectors. From 4 to perhaps 8 years PQE a move in-house is likely to see a lateral salary shift. However, in-house positions usually offer additional benefits which need to be considered and there is a perception that work life balance is better working in-house.
What advice would you give someone in private practice looking to move in-house?
Our advice has always been to gain a few years PQE working in private practice before considering a move in-house. Those years are invaluable and can certainly help to fast track your career. More often than not, those who spend additional years in private practice before moving in-house will be appointed into a more senior position quicker than those with the same number of years experience who moved in-house sooner.
What are the projections for 2017 for the in-house & compliance market?
The market is still tough due to economic uncertainty. Furthermore, with the inception of LOC’s, some legal teams are choosing to reduce the size of internal legal teams and outsource the legal function on a case by case basis. While we anticipate an increase in LOC activity, we are still of the opinion that competent permanent in-house counsel will be a cost benefit to a company.
As things currently stand, many of the large corporates are not really hiring and many of the other sectors are under extreme pressure to cut costs too. The new BBBEE codes are also playing a significant part on appointments at all levels as well as procurement spend. Normally, legal departments are seen as cost centers which make them one of the first targets of any cost cutting exercise. Last in, first out may be a policy worth considering when doing your own due diligence into a potential employer. In this regard, please contact us if you would like some objective advice about any such move, even if we are not representing you, we are open to assisting you to make the right move at the right time.
Anticipated salary increases
Much like for private practice, we don’t anticipate dramatic salary increases. For in-house, we predict the majority of increases will be inflation targeted. According to our survey of lawyers working in-house, the overwhelming number of respondents seem to share our thoughts with almost 65% of respondents expecting an increase less than 7.5%, as can be seen in the below graph.
Regarding the current salaries within the in-house environment, below is a graph setting out actual minimum, average and maximum figures as received by respondents to our survey.
Please note, the salary ranges for the above “in-house” graph are not industry specific and are merely based on the number of years PQE.
For bonuses within in-house, about 90% of in-house respondents indicated their employer provides for a bonus of sorts. Of the respondents, only 12.17% said achieving the bonus was easy with 0.86% saying it was impossible. That left a healthy majority of 86.97% saying that it was challenging to achieve the bonus targets.
Finally, almost 70% of respondents believe the bonus provided for is adequate whilst just more than 30% feel it is inadequate.
In closing, the data we received from respondents to our survey was extensive and the nature of this report cannot examine all facets. We are happy to arrange a consultation to discuss some of the findings or to perhaps discuss a particular point(s) you wish to discuss. In this regard, please get hold of us in our Cape Town office to arrange such a discussion.