HSF, Freshfields and A&O among outfits to introduce belt-tightening measures
A growing number of City law firms have frozen the salaries of their junior lawyers as the profession braces itself for any potential financial repercussions from the COVID-19 pandemic.
Herbert Smith Freehills yesterday announced that it had frozen pay for all employees and suspended salary reviews for at least six months. The belt-tightening measures, which apply globally, will also see partners receive reduced profit distributions.
The global law firm did add that it intends to award bonuses for the 2019-20 financial year but paid 50% in July and 50% by the end of the year.
“This is a global and evolving crisis, with major human and economic impact,” a spokesperson for the firm said. “We cannot predict how long it will last, or how deep it will be. Like all businesses, we have carefully considered the prudent measures we need to take to protect the firm and our people.”
“We have already taken a range of steps to reduce costs where we can, and we are in a strong financial position following a partner capital increase and a strong capital focus over the last twelve to eighteen months. To ensure we remain resilient, we have decided to take some additional measures.”
Freshfields has taken similar steps to protect its financial position. The magic circle player confirmed this week it had frozen pay across the firm and suspended its latest quarterly partner distribution. It has also deferred decisions on staff bonuses, which usually take place this month, until later in the year.
A Freshfields spokesperson said: “We are focused on supporting our people and continuing to serve our clients as we all adapt to the social and economic uncertainties. We are managing our business responsibly and will continue to invest in our business for the long-term.”
Meanwhile, fellow magic circle player Allen & Overy (A&O) said it too was freezing salaries and deferring some bonus payments in repose to the pandemic. The firm was due to undertake annual salary reviews for associates and support staff in the first quarter of the forthcoming financial year, but this will no longer go ahead.
A&O will still award bonuses for this financial year, with bonus payments for assocaites and more senior support staff split between July and October. It also confirmed it was making “adjustments” to partner profit distributions, increasing partner capital levels, deferring certain investments and recruitment, and cancelling events.
“The COVID-19 global crisis is an unprecedented situation for us and our clients,” a spokesperson for A&O said in a statement. “The firm is in a very strong financial position but given the unknown nature of the evolving challenges, and their long-term impact on our markets, it is sensible to introduce some prudent management measures as part of our ongoing scenario planning.”
Other City players have adopted similar measures in the wake of the virus. Last week Norton Rose Fulbright confirmed it was in the process of asking “eligible personal” to drop down to a four-day working week and take pay cuts in “pre-emptive action” to protect jobs and revenues throughout the virus crisis.
Elsewhere, Pinsent Masons has deferred its first quarterly partner profits and furloughed some of its non-fee earners. The firm said it will top up by 20% the salaries of all furloughed staff on the government’s emergency scheme, which covers 80% of an employee’s wages up to £2,500 per month.
Pinsents’ senior partner Richard Foley said:
“Businesses around the world are trading in circumstances that none of us have faced before; we’re no different. We are only making decisions today where we have to. If we can wait to allow those decisions to be better informed by taking them tomorrow we are doing so.”
Taylor Wessing today confirmed it, too, was withholding distributions of profit to partners and furloughing staff “whose roles have been impacted by the move to remote working”. The firm said it would topping up salaries to 90-100%.
“Each of these measures is being taken with a view to the long-term preservation of jobs and sustainability of the business”, the firm said in statement. “Each decision is difficult to make, but all are being made because they will best serve our firm during this challenging period.”