The legal sector is taking full advantage of the government's furloughing deal and sloughing off hundreds of staff.
But firms have adopted very different approaches to supporting employees, with some topping up furloughed staffs' salaries and others declining and, in addition, imposing pay cuts on people who continue to work without reducing their hours.
Under the government scheme, the taxpayer funds 80% of each furloughed employee's wages up to £2,500 a month for three months.
Eversheds Sutherland has furloughed 39 staff whose roles cannot be performed remotely, including receptionists and facilities team members, for three weeks. But the firm is topping up all their pay. It is also deferring all salary reviews and bonus payments, while partners are inching towards taking a hit. "Discussions are ongoing", Managing Partner Lee Ranson wrote in an all-firm email sent yesterday, "but the expectation is that drawings will shortly be reduced and/or deferred". DLA Piper has also furloughed its front-of-house and facilities teams.
Liverpool-based Brabners, which also has offices in Manchester and Preston, has furloughed 75 staff. But sources criticised the firm for imposing a 20% pay cut on the remaining, working staff. The cut will last at least four months from 1 April and employees are expected to work full time.
In a joint statement, Brabners managing partner Nik White and CEO Robert White told RollOnFriday that the COVID-19 outbreak had "negatively impacted a significant number of our clients across a range of sectors".
They said the pay cut will apply to partners, too, as a 20% reduction of their drawings, and will only apply to employees earning at least £25,000 a year. Those below the threshold will see their salary reduced by a percentage that ensures they still earn at least £20,000 a year.
“While we fully appreciate the significant impact these measures will have on our colleagues, we believe they’re necessary to ensure the firm can successfully navigate the current uncertainty", said the Whites.
Addleshaw Goddard confirmed it was furloughing paralegals, though not all of them. AG said it was not topping up furloughed employees’ salaries "out of fairness to those who continue to work full time".
Do you want to be furloughed?
Taylor Wessing has furloughed staff whose roles were impacted by the move to remote working. But the firm is topping up their pay to 90-100%. In a statement, Managing Partner Shane Gleghorn said Taylor Wessing told RollOnFriday the firm was also withholding distributions to partners and pausing recruitment.
Taylor Wessing is also "requesting" that people take their pre-booked holidays. Even though staff now can't go anywhere, "being able to have rest periods from work is even more important for wellbeing, especially when working from home", said Gleghorn.
Employees, directors and partners at the firm must use up two thirds of their annual holiday by the end of August. Gleghorn said the measure was required to "support client demands" and to "avoid disappointing holiday requests towards the end of the calendar year". Asked why Taylor Wessing couldn't change its policy to allow unused holiday to be spread over the three years following release from lockdown, a spokesperson said, "We could allow people to carry over all their holiday, but that would have a negative impact on our ability to service clients at a time when we believe business will have picked up. That would be in no one's best interest".
Foot Anstey was slammed by insiders for cutting salaries by 10% and furloughing staff. "Appalling treatment", said one. Staff were asked to volunteer last Monday and a selection (circa 25%) were furloughed by that Friday. Others were moved to a three or four day week. "No consultation and no choice. Not a great way to engender loyalty in your employees!" said a source.
"These are unprecedented times with every firm being forced to make difficult decisions", Foot Antsey told RollOnFriday in a statement. "After careful consideration, we have acted to best protect the jobs of our people and reduce the long-term impact on the business. We have put in place a number of temporary measures affecting firstly Partners but also employees. These include taking advantage of the Government's furlough scheme, flexible working models and, for those not affected by either of these, a temporary 10% pay cut. All of these measures will remain under constant review with protecting jobs our main priority”.
There was dissatisfaction, too, at London-based real estate specialists Silver Shemmings Ash. It has furloughed seven members of staff, said a source, without a top up, "and is trying to force the other staff to take a 20% pay cut, all of which has led to the resignation of one partner".
A spokesperson for Silver Shemmings Ash said that account was "not entirely accurate". He didn't specify precisely how it was inaccurate, but explained that, "like all businesses, Silver Shemmings Ash has had to make some difficult decisions".
"Unfortunately some staff were asked to consider being furloughed", he said. The firm's partners have been "asked to consider" taking a voluntary 20% reduction in their salary, while payment of all bonuses, salary rises and non-critical spend have been suspended.
Freeths furloughed over 110 staff on Monday and more rounds are planned as soon as next week. The firm is topping up all affected employees' salaries to 100% for the first three weeks, after which the strategy will be reassessed, and has deferred April's distribution to partners. It has also cancelled the bonuses for 2019/20 which were due to be paid in May. A source complained this was despite Freeths ending the financial year "with best ever revenues in excess of £100 million", and said claimed it was looking to use the cash to fund redundancies.
"Freeths had another highly successful year in 2019/20 with turnover once again increased by over 10%", responded the firm in a statement. "However, the firm’s forward planning is of course influenced by the current situation and it is expected that there will be a reduction in activity levels".
It said the bonus pot would be preserved "for the benefit of staff later in the year", potentially "to preserve jobs rather than being paid out as a deferred bonus". The firm said it had "no plans to make redundancies at the present time", but that "no decision has yet been made on the bonus pool".
Burness Paull has furloughed some 150 staff, and is topping up all their salaries. "The firm is financially robust, and we are not planning to make any redundancies, cut pay or enforce reduced hours", said a spokesperson. Partner drawings "will be reduced", said a spokesperson, "and we are considering further measures including deferred payment of partner profits".
“Everyone has been fully engaged in discussions about why this course of action is appropriate and their response has been very positive and understanding”, he added. All except the disgruntled source who told RollOnFriday that Burness Paull was only topping salaries up to a maximum of £45,000, which was "a massive pay cut for many". Fetch the tiny violin (play it to your neighbours).
Thanks for this round up. Just as an addendum, can you please also ask firms to confirm how many firms are letting go people on probation as I have heard a number of stories of firms using this time to have a "it's not working out" conversation and binning staff to avoid it being classed as a redundancy situation. Thanks.
In addition to the furloughs: “...and hundreds of stealth layoffs” which will not generally not be in the headlines.
Agree with above posted by Anonymous at 11:26am re. employees on probation - I have heard of those stories too.
Not surprised Brabners struggling or that the staff don’t like the cuts. Not the best payers anyway!
Why are AG using fulough when they are boasting that they have £80m in the bank and partners fully drawn? It's all well and good to criticise footballers but our profession (and especially those at the top) need to stand up and play their part.
A number of firms will fail unless they go further and reduce head count and pay. 20% will not be enough. It needs to be 50% and they need to shed 30% of their partners and staff.
There is at least another 3 more months of this. 1-2 months will finish off many firms unless they wise up.
Have also heard a lot of stories about the "it's not working out" variety for people still on probation.
This includes people who were performing ok and now receiving letters accusing them of not reaching the satisfactory standard which has come from nowhere.
All to avoid having to make redundancies that attract bad press.
Freeths - “It has also cancelled the bonuses for 2019/20 which were due to be paid in May”.
They haven’t told their staff this yet and they’ve failed to mention that these bonuses are contractual bonuses.
Brabners have done what they needed to do but firms their size or smaller are going to really struggle over the next 12 months. 20% may just be the start.
Sounds like you’ve been busy, analysing in detail the financial performance, client base and projected income stream of all firms to get to those figures. How is life in black and white by the way?
If i take a 50% pay cut, that'll just about cover my train ticket.
Kinda pointless going to work then.
But keep up the positivity hey, christ imagine being in lockdown with you Mr Happy.
I'm fairly certain that Brabners have no other choice. It's a really nice firm and they care for their staff.
I'm also certain that Brabners have no other choice. Month to month cashflow will always be a problem for a firm like them - as I recall, they're also really top-heavy, and have a lot of consultants/ partners who are simply not bringing in enough money/ work. I hope they use this as an opportunity to shift some under performing partners.
They don't care for their staff any more/ any less than every other firm, they just pretend to. When times are tough, they do what they need to to survive, regardless of the effect that has on their staff.
I am not sure everyone gets the dynamics of this.
If you have built the infrastructure needed to support, say, a £50m business and the impact of the pandemic is, say, you anticipate a reduction in work of 20%/30%, you very quickly (a few months) have a problem in terms of both cash and having a business that is capable of being regarded as a going concern unless you do something.
Former Brabners employee and Death Knell are right. These steps are only being taken as there is no alternative if the firms want to ensure their longer term survival. And if they don’t survive, then no one currently working for them will have a job and will enter what is at the moment a non-existent job market.
100% agree with also former brabners employee... so much dead weight in senior roles milking the business with no clients. That’s why everyone leaves after 3 - 5 years. Had some disastrous lateral hires on big money whilst those that have been there long term and done well are not rewarded.
Profitable corporate firms taking cash from the government is a disgrace.
Snouts in the trough - partners too greedy to do the right thing and put their hands in their pockets after years of bumper paydays.
For those operating in la la land, keep your eyes screwed shut and your fingers in your ears.
A 20% pay cut will get firms through 2 months of a 12 month cycle of pain. Their clients cash reserves will be depleted so there will be no acquisitive activity and much less work around generally.
20% will not be enough. Further cuts are inevitable as are redundancies. Law firms live with enough cash to last a couple of months maximum if there is little to no fee income coming in.
The threat of going bust is real. A number of law firms, particularly those which do not react quickly enough or just fiddle around the edges, will go bust. This is not merely another recession. Look at your balance sheets, look at your aged and (uncollectable) WIP and debts making up those balance sheets. They do not tell a story of firms who can ride out the 12 month cycle without doing something drastic. As a managing partner you are limited as to what you can do and reducing salaries/drawings and head count will be the only realistic options for most firms.
Round 2 of cost cutting will be worse than round 1.
Death Knell 2 @ 0847
Your comments about law firm economics are spot-on; round 2 is going to be much worse.
in addition to your comments about Wip and debt etc., employees should also keep a close eye on partner behaviour (partner departures specifically) as that will have a material impact on a firm’s strength. My firm has had a number of recent partner exits and some people are worried if more are coming and what that means for the firm (although moving in this market is becoming almost impossible). A good post from another article copied below describes the perfect storm:
“The Seer 09 April 20 07:50
The recent Horizon article in The Lawyer highlighting the worrying lack of cash in those firms towards the bottom of the top 30 is very prescient given the times we are now living in.
Running even the most basic financial threshold tests on some of these firms can cause alarm (no cash, high debt, high WIP, big liabilities, poor utilisation etc) but all is not bleak because law firms should, theoretically at least, be financially robust because of the way they’re capitalised, i.e., the availability of partners capital and the retention of tax reserve and distributions for use as working capital; however, this is where the tension sits because when times get tough in a firm then those partners who can move want to move quickly and ideally be one of the first in order to protect their capital, distributions and tax reserve. This means one thing; the real issue to watch is partners jumping ship and triggering a run on the bank scenario. Of course when this happens the remaining partners suffer but it is the fee earners and support staff who get caught out most as they frequently don’t realise what’s happening until it has happened. The lesson here; watch how your firm’s management respond to this crises and watch the accounts but also watch the front door to see which partners go out but don’t come back.
link to a cracking article below
Y'all voted tory.
Now y'all can enjoy the generous social security that you thought was such a great idea.
Ho, ho and ho.
It takes time to change things and Brabners has shown the door to a number of non-performers whilst recruiting and through recruitment, improving the quality of its partners. The negative posts on here are likely from those shown the door.
A Foot Anstey staffer who was asked to reduce my hours to 4 days a week here.
While I have to say that the messages around furloughing and pay cuts, particularly from the firm's Managing Partner, have been a bit blunt to say the least, I can't fault the firm for being frank and professional with us at all times. Communications have been regular and detailed (including a video Q&A session in which our Managing Partner answered anonymised questions submitted by various people in the firm - some of which were brutal). I am in no doubt that the firm are sincere in their aim of trying to avoid mass redundancies. For example, it has been made clear that the partners are taking significantly reduced drawings, at least 30% I understand. Communications from other senior people in the firm have been much more on point from a tone perspective.
These are tough times and we have to be grown up about this: when you options are take a paycut/furlough/reduced hours or be made redundant, the choice is a pretty simple one. I have no doubt the firm will weather this storm.
At least Irwin Mitchell's teenage case handlers will be kept busy making NHS and care-home workers' staff lives miserable with negligence claims for years to come. And the dead-eyed partners who promote this kind kind of work will be raking it in.
I was let go while on probation at a boutique.
Frustrating as everything was going well. Suddenly a partner I hadn't spoken to more than a couple of polite words called me and informed me it wasn't working out and was let go. Provided with the minimum amount of contractual pay and asked to return my pass and phone. Immediately locked out of IT and my company mobile instantly disconnected remotely by IT.
Recruitment freeze for almost all firms I have spoken to, whether directly or via recruiters. Disappointingly some recruiters have approached me proposing some roles that I have had to inform the recruiters that the firms have expressly told me they've frozen hiring, so not even the recruiters are kept updated.
Luckily I have a small amount of reserves but expect this will be even worse than 2008/2009.
Sadly this was meant to be "our time" following 10 years of recovery. Now it's back to the drawing board again.
Can those who commented above email RoF with the names of those firms?
Also, handy information on stealth layoffs available here:
Urgh stealth layoffs are really cruel. We should name and shame.
in reply to "Y'all voted tory." - and what did you vote? Corbynista Communists? So they come and take all your salary and spend it on champagne for themselves or waste it on more useless projects? and then to also tax you at 60 % so you become 'working mass' too a who think they are entitled to something for nothing and just complain all the time that someone owes you a living..... niiiiiiiiiiice.. good luck to you.
I work for a large US firm and they are getting rid of people. Hoping that those affected reach out because firms should not be letting go of people in the midst of a crisis without being named and shamed. Firms are first in line to promote themselves in the good times and those same firms are now trying to avoid the spotlight in the bad times whilst still chopping heads.
Reckon Slater and Gordon won’t miss this once in a generation opportunity!
In what practice areas are people on probation being let go? I am a commercial litigator on probation and am hoping I won't get binned.
Firms should be forced to submit staff numbers to SRA comparing before and after Coronavirus along with reasons for reduced numbers.
My firm has just announced a furlough of 49 staff yet we still have 2 managing partners! Why do we have 2? Could someone explain what the practical and economic benefit is of having 2 managing partners?
I think that Blake Morgan deserve a mention here....
Pay cut 12-15% dependant on salary for all for a year(!!!) with NO reduction in hours.
Furloughing as many as possible but not topping up due to firm wide pay cut.
Unclear what reduction Partners are taking.
Greedy greedy partners. The worst thing about law firms is the rubbish management - partners shouldn’t be managers.
Anonymous @ 0828
Completely agree about greedy partners but just wait until the going gets really tough and they start turning on each other.
Anon @ 0630
If they both fee earn/originate and wash their faces financially then it doesn’t really make any difference but if they don’t and they’re basically overheads then there should be questions asked about the financial probity of the arrangement (at any time but especially now when staff are taking serious financial scalpings).
@TopMan 15 April 20 20:38
I was canned as senior associate in Profin defence. Construction and engineering disputes. Fingers crossed you're ok - best of luck.
Some firm's also need to consider what their position is with multiple layers of partners in management roles where such functions don't contribute to the bottom line - team/practice/department etc., etc.
Kirkland & Ellis deserves a mention
Jeff Bezos has made more than 11 billion pounds since this things started.
It'll trickle down eventually.
We'll be fine.
Don't worry. There's a Brexit Bonanaza coming when the transition period ends on 31 December.
After that Britannia will finally be unchained and we'll never look back.
At the end of this I hope ROF publishes a article outlining precisely what action was taken by firms during coronavirus.
It can be like the golden turd rating system and consolidate all their original and interim articles about firms into a final version.
@Anonymous 16 April 20 09:32
Surely insurance litigators are busier than ever in a crisis ... ?
@ Jim 16 April 20 16:01
Senior associates are quick to be given the boot. Expensive and their work can be delegated to more junior sols. The juniors will be too scared to reject taking on the additional workload.