This climate has prompted City of London banks and legal firms to make more of an effort to hang on to their staff - apart from simply offering more and more money. Yet it is an issue they are reluctant to discuss in public and of the 15 banks and legal firms contacted by Financial News for this article, only one - SJ Berwin - was prepared to speak on-the-record. Headhunters, however, do have some overview of what's going on.
Rupert Channing, who runs financial recruitment at Heidrick & Struggles, says banks are becoming more generous with sabbaticals. 'One investment bank is now allowing staff to request a three-month sabbatical, during which they'll receive 100%, 80% and 60% of their salary on each successive month,' he says. More significantly, perhaps, 'they are also negotiating term contracts with people - the notion that firms should need to rehire their top talent is increasingly prevalent'.
Bruce Berenger, head of legal recruitment at Heidrick & Struggles, says that for senior assistants in legal firms, 'all sorts of benefits are now being talked about - split shifts, taking sabbaticals, being allowed to do a partnership-sponsored MBA, crèches in buildings. You're also seeing something of a culture shift, where people are leaving firms where they're expected to bill 2,800 hours a year (a 60-hour working week) and are going off to join less pressured environments, where they might bill 1,600 hours a year. Some of those smaller houses are marketing themselves on the basis that they're more understanding, more convivial, you can work from home, those sorts of things.'
Even at partner level, where very long hours are traditionally seen as the quid pro quo for huge salaries, Berenger suggests that employers are becoming more flexible: 'I recently saw a situation where an equity partner wanted to spend more time with her family. Instead of saying 'Goodbye', the firm reduced her status to that of salaried partner and she now works four days a week. In the old days, that wouldn't have happened - and I think this flexibility, at partner level, results from the recognition that there are not enough good people around and managers are doing more to keep them.'
Salaries remain very high, despite the market fall-off: 'An associate is probably being paid three or four times what he would have been earning three or four years ago,' says Channing. Investment bankers may be expensive commodities, but in a bear market, they generate fantastic sums of money for their employers.
'Most banks recognise that the 'lost opportunity cost' of not having the right resources in place is far higher than the recruitment cost... the total revenue pot available to investment banks is pretty enormous and they'll take advantage by equipping themselves with the best people they can. There is a point where (salary inflation) becomes unviable, but I don't think that has been reached yet.'
Not everyone agrees. A managing director at one well-known bank, who did not wish to be named, believes the gravy train may be coming to a halt: 'The boom market has allowed a lot of pretty average investment bankers to make a very reasonable living. (But) we're now going into a period where people are a little bit less confident about the economic environment and firms are focusing very much on their better people - because if there is a downturn, you want your best people to stay with you. So we're seeing a situation where there is an increasing gap between the compensation paid to a firm's proven, best assets, and the mediocrities.'
Anthony Dunlop, head of BG Careers, the career management consultancy arm of Baines Gwinner, can help clients to devise strategies for retaining people. Dunlop says: 'We're talking to a few law firms and banks about these issues. They are losing important people and there's a skills shortage. One issue that's coming up time and again is work/life balance. No longer does a young lawyer want to work 80 hours a week for three months - they want to get a life. And law firms are waking up to the fact that they've got to monitor the amount of hours their staff are doing.'
Some contest this view. Keith Wood, head of law firm SJ Berwin maintains that his lawyers fully accept the need to work long hours and don't complain.
Dunlop reports that more City of London employers are becoming interested in providing career management services for younger staff: 'Banks and law firms are excellent at recruiting graduates and training and developing them for the first two or three years, but there is definitely a gap from year three onwards, to help them map our their careers. But some firms do have mentoring schemes, to help people to reach assistant director level in a bank, or in the case of a law firm, achieve a partnership.'
One fairly common initiative has been the introduction of concierge services for staff at banks and law firms, which can take care of chores such as shopping, dry cleaning or arranging holidays. But such services are easy for rival employers to copy. According to Michael Moran, executive director of Meridian Consulting: 'They take away nuisances, but they're not motivators.'
Many firms are also trying to discourage staff from leaving by providing share options and investment packages that tie them in for a number of years. However, as Moran and others point out, these are easy to replicate and predators simply up the ante by offering even bigger 'golden hellos' to entice people into jumping ship: 'You're never ahead... it's a cat-and-mouse game.'
But intriguingly, Moran believes that competition for staff is forcing the macho City of London to make some concessions towards family life.
'We're starting to see job shares, and people taking chunks of time out and then coming back - which you never used to see. At the moment this applies mainly to women, but you'll also see it start to happen with men,' Moran predicts.
'Increasingly, organisations will structure their jobs around people's needs, and not vice versa - if you're good at your job, you can say when and how you want to work. And organisations that don't respond won't keep their people.'
This may sound wildly optimistic, but Moran insists: 'It's already happening in the big accountancy firms, which now have a much more flexible attitude to mothers and to working on a part-time basis - because otherwise, they can't get good people. The City is just beginning to get into this ball game, but it will come.'