Osborne Clarke to repay lawyer COVID salary cuts

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Performance exceeds expectations for first half of financial year

Osborne Clarke has announced it will pay back the solicitor salary cuts it made earlier this year after performance exceeded expectations in the first half of the financial year.

The firm had taken the “unfortunate but prudent decision” to cut staff pay by 7% for a 11-month period starting in June. The pay reduction applied to employees earning more than £30,000, although the firm said that if it met its new financial target for 2020-21, it would repay employees back.

“Following a better than expected H1 [first half], we’re pleased to announce we will be paying back the 7% salary reduction we introduced in June,” a spokesperson for the firm said. “It will cover five months (the period of June to October) and will be repaid in December.”

The spokesperson added that the firm will review the pay reduction again in the third quarter of the financial year and, if the figures allow, it will repay the balance and stop deductions going forward. “We will also make a flat-rate payment to every eligible employee in December as a thank you for their efforts,” the spokesperson said.

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Osborne Clarke said it has decided to wait to address partner drawings until staff salary reductions are fully repaid, though targets are in place and it hopes to be in a position to advise on monthly and quarterly special draws early next year.

The firm also confirmed performance bonuses for 2019/20 have been deferred to July 2021 and, at that time, it will look back over the last two financial years to reward exceptional contributions that were made.

Osborne Clarke announced last month it had brought back 116 furloughed members of staff, including business support staff and paralegals, in August, and repaid government funds it received as part of the furlough scheme. Ray Berg, managing partner, said at the time that the firm’s half-year results had held up “better than we had initially feared”.

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How does that work for tax/HMRC purposes? Will that even out on a monthly basis, or will all employees just receive one lump sum in December together with their regular paycheck, and HMRC whacks it with a fat deduction? Genuinely curious



Do you know how tax works?

It is your annual earnings that are important, not your monthly earnings.



Piss off bob


Speaking from experience

Your option 2: they’ll get a lump sum and HMRC will freak out and take more than they would have had the repaid amount been paid on its normal schedule. They’ll get it refunded in the new tax year.



Depends on if it puts you in the next tax bracket. It’s not a massive lump sum for most and will unlikely trigger that – it’ll just be taxed at the normal amount.



This is quite decent behaviour.



Meanwhile, Slaughter and May are still saying it’s “too soon” to think about unfreezing associate salaries and reversing the NQ pay cut. What a disgrace.


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