THREE MONTH NOTICE PERIOD TREND IN HONG KONG, A PRODUCT OF MARKET CONDITIONS

It has long been the case in Hong Kong that most UK law firms and a very small minority of US law firms have three month notice periods for their US associates built into their employment contracts. But until about 18 months ago it was not common for any firm to enforce a three month notice period when a US associate left solo[...]

20150731_192712It has long been the case in Hong Kong that most UK law firms and a very small minority of US  law firms have three month notice periods for their US associates built into their employment contracts. But until about 18 months ago it was not common for any firm to enforce a three month notice period when a US associate left solo.  

Things started to change in early 2014, when UK firms in Hong Kong started to more strictly enforced three month notice periods on their US associates. Since then, a handful of US firms have also added three month notice periods, including a couple of top-tier firms. Although we don’t expect the majority of US firms to follow suit anytime soon, some firms will, and it’s a trend that may haves some legs. We expect the UK firms to continue to strictly enforce their three month notice periods for some time.

There are various reasons for this trend. First, the qualified junior to mid-level US associate candidate pool dried up substantially for top US firms in Hong Kong. Two things caused the dearth of candidates: a fairly hot Biglaw market in both the US and Hong Kong / China (i.e., strong demand) and small class years from 2010 through 2013 at top tier US firms globally due to the 2008 -2009 US recession (i.e., strained supply).

Previous recessions caused one or two class years to be undersized and firms could always recruit around those class years. But after the “Great Recession,” we have four undersized class years.  These classes are now cycling through the key mid-level years, during what has been a boom market for many firms for a few years. It’s an anomaly on the market in our Biglaw industry that may not be repeated again. It certainly is not likely to be repeated during our careers.

Complicating matters in Hong Kong, relative to the US markets, is that many US associates of Asian background at top firms in the US are not as anxious to lateral to Asia early in their careers as was the case from 2008 to 2012. With US markets and Biglaw deal flow much stronger in recent years, especially in M&A and cap markets, things have returned to pre-recession situation of 2007 and earlier years. The upshot is that a significant portion of the Mandarin-fluent top US associate candidate pool opted to remain in New York or other major US markets for two to five years or longer. From 2008 to 2012, hiring partners in Hong Kong were spoiled by the proactive flight to Asia of most junior to mid-level Mandarin-fluent associates from top tier firms in major US markets. Today, many US based associates with Chinese background still intend to lateral to Asia eventually, but they are being much more patient and strategic about their moves. The pipeline of Mandarin fluent associate candidates from US seeking to move or transfer to Hong Kong / China has certainly slowed down some in recent years.  

Recruiting in Hong Kong for junior to mid-level US associates is as competitive now as we have ever seen it, especially at the top tier US firms, which have had to lower their level of selectivity a bit this year. Top-tier US firms in Hong Kong are routinely considering candidates seeking to change practice areas and also candidates from less-than-peer firms (similar to the Hong Kong market mini hiring booms of 2006 – 2007 and 2010 – 2011).  It’s quite common now for Mandarin-fluent associates in the four undersized class years to lateral upwards from 2nd and 3rd tier to top tier firms. When they do, they leave holes behind that are hard to fill at their previous firms.

It can be very frustrating for busy hiring partners to deal with three month notice periods. The pushed-back start date in a busy market is the biggest issue of course, but there is also the issue of current firms having three months to try to change the mind of a highly regarded associate giving notice. While still fairly rare, most US firms in Hong Kong have dealt with at least one painful reversal in recent years, due to the current firm recruiting an associate to stay during their notice period, and that experience has some hiring partners quite wary about waiting three months.

The minority of US firms with three month notices are sometimes compromising and allowing the associate to leave in 4 to 8 weeks, but after sometimes tense negotiations that can last for weeks and can lead to at least slightly burned bridges and some frustration between the two firms involved. The UK firms are more strictly enforcing their notice periods, to the point where US associates can hardly attempt to start a negotiation on their end date.

The hot hiring market has caused over half of the top tier US firms in Hong Kong to make their lateral associate hires whole on year end bonuses, instead of the usual pro-rated bonus. The three month notice period has caused some havoc here, when new hires successfully negotiate for full year end bonus, usually conditioned on an as-soon-as-possible start date. Some hiring firms in these situations are still honoring the full year end bonus, but it puts a lot of pressure on the new hire to keep pushing for a more reasonable end date at their current firm during the notice period.

A number of our recent US associate placements in Hong Kong have signed offer letters with three month notice periods. Some firms even try to impose three month notice periods on their internal transfers, through a new employment agreement with that firm’s Hong Kong offices. In some cases these are non-negotiable terms. Since it is quite the momentum breaker to already start bargaining then for departure terms, most folks don’t bother.

Feel free to reach out to us at asia@kinneyrecruitng.com if you would like to further discuss this topic or get advice on giving notice at a three month notice firm in Hong Kong. Obviously there is a lot of background information that can’t be shared openly with anyone other than our trusted candidates and clients.