Unlike the GFC, Australian law firms were quick to respond to the economic effects of COVID-19. A majority of current law firm partners and managers were in leadership positions during the GFC, and we believe that as a result they were both quicker acting and far more pro-active when dealing with the financial effects of COVID-19.
Firms took steps to share the burden amongst staff and partners, and to utilise available mechanisms to reduce cost and share the load. Since late March, top-tier and mid-tier law firms have been implementing various measures in response to COVID-19.
Summary of measures taken
A range of steps have been taken by firms to reduce their largest overhead — staff wages. These have included a freeze on salary reviews, encouraged or forced annual leave, annual leave purchasing, partial stand-downs and salary reductions, redundancies, and reduced or cancelled bonuses. Reduced partner draws were also introduced almost immediately, and likely proceeding any real drop in revenue.
Three of the biggest 10 firms (Minters, Ashurst and NRF) asked staff to accept cuts in pay of 15-20% and outside the largest 10 firms it seems that a paid four day a week is also commonplace across the profession, with many small firms adopting it.
Our observations
While we have based the table below on material that is only in the public domain, our own observations are that, while some employees accept that cuts to staff wages are reasonable, others believe it does not take into account their personal circumstances. For example, we have had contact from plenty of lawyers who are still meeting budget but being paid 80% of salary. While those lawyers are unlikely to move now as a result, we do expect this will cause a shift in how they see their employer, and result in higher turnover for some employers in the long term. There are also many firms who have taken very few steps other than putting a pause on non-essential recruitment. Finally, we remain busy with some firms who see this market as an opportunity to acquire partners and teams, and who are chasing strategic and financially net positive hires.
Firm |
Salary Review |
Partners |
Staff |
Graduate recruitment |
General Hiring |
Ashurst |
Deferred until Nov 2020; bonuses paid 50% in July 2020 and 50% Nov 2020 | Reduced by 20% for 6 months | Staff pay and hours have been cut by 20% | Not effected | |
Clayton Utz |
Support staff allowed to purchase leave | Offered $10,000 incentive to Mar 2020 grads to start as planned. | Hiring | ||
Clifford Chance |
Salary reviews and increases are on hold; bonuses to be paid on Nov 2020 | Partner profit distributions are being deferred | Not effected | Hiring | |
Colin Biggers & Paisley |
Review deferred until Nov 2020 | 20-40% salary reduction; heavier cuts to more senior partners | 20% reduction in salary from May – Sep for staff making $75,000 + | Non-essential hiring on hold | |
Dentons |
Equity Partners take home pay reduced and profit distributions frozen | 20% salary reduction | |||
Gadens |
20% pay cut through Sep 2020 with no corresponding cut in hours | Deferred 2020 graduate program; no 2021 graduate recruitment | |||
Gilbert & Tobin |
Partner draws reduced by 50% | Not effected | Non-essential on hold | ||
Hall & Wilcox |
Hiring on hold | ||||
Herbert Smith Freehills |
No salary review or pay raise; bonuses applied 50% Jul 2020 & 50% at end of year | Profit distributions reduced (quantity unknown) | Not effected | ||
Holding Redlich |
10% reductions in partner draws | Hiring on hold | |||
Holman Fenwick Webb |
Frozen pay raises for 2020-2021 financial year | Deferred partner profit distributions (amount unknown) | Staff are taking 25% of annual leave by end of June 2020 | ||
Hopgood Ganim |
20% reduction for Equity Partners but normal work hours | Salary reduction of 20% for staff earning above $65,000 and proportional reduction in hours | |||
Johnson Winter & Slattery |
Delay in 2020 offers in some states until they have a clearer idea of commercial legal market impact | ||||
King & Wood Mallesons |
Staff being trained in practice areas expected to see greater work levels | Not effected | |||
Macpherson + Kelley |
Salary and hours reduced by 20% | Salary and hours reduced by 20% | Non-essential recruitment on hold; but strategic hiring in high demand areas of law | ||
Maddocks |
20% pay reduction for executives and reduced partner draws | Salary reduction of 18-19% | Not effected | Only business critical recruitment | |
Minter Ellison |
50% cut to partner draws | 15% cut for rest of year in exchange for 6 weeks of COVID leave | Not effected | ||
Moray & Agnew |
Workloads have been adapted to mitigate downturn in work | Casually employed grads are not getting any work (Melb only) | |||
Norton Rose Fulbright |
Salary review on hold | Partner draws temporarily suspended | 3% staff stand down; for the rest hours and salary reduced by up to 20% | Hiring on hold | |
Russell Kennedy |
Hours reduced in line with decline in client demand | ||||
Slater & Gordon |
Directors/CEO/Executive Leadership team reduced base pay by 10-15% | ||||
Sparke Helmore |
No pay rises this year | Adjustments made on individual basis | |||
Swaab |
Hiring on hold |
Effect on graduate intake
As to the 2021 graduate intake, unlike what occurred during the GFC, graduate numbers have largely been retained.
G&T, Allens, Ashurst, CU, Maddocks, Corrs, DLA Piper, HSF, KWM and Minters have begun making offers in various states and plans to do so in the same numbers as previous years.
Several firms are delaying making 2021 offers (April offers coincided with COVID-19) with the majority of firms keeping their graduates on, but adapting practice group rotations to get staff where they are in most demand.
Reflecting that some states have later timelines, other firms have held off making offers until there is more clarity around the consequences of COVID-19.
A selection of comments from law firms
Global Managing Partner of Ashurst, Paul Jenkins has said, “The health crisis we are seeing in the countries where we operate is unprecedented. We’re all trying to do the best we can to navigate the very different world we now find ourselves in.”
The underlying philosophy that Norton Rose Fulbright has towards their response to COVID-19 is, “Face this situation together and, by acting as one, come through this stronger. Taking proactive steps to address the likely business impacts while continuing to support our clients and preserve jobs. Just as important will be ensuring that we have the right teams in place to support our clients through the crisis and eventual recovery.”
Sparke Helmore has stated that every action they intend to take is fair and the wellbeing of every individual is at the front of their mind. They are not intending to implement a “one-size-fits-all” approach with sweeping mandates applied without consideration for individual circumstances.
Chairman, Jerry Smith stated that this was “a very hard decision” as the firm had never deferred a graduate program before. “In this current environment, our graduates would not get the training and mentoring they need to set themselves up for a successful legal career at Gadens.”
HSF notes that this is a “global & evolving crisis with major human & economic impact. [We] cannot predict how long lasting or how deep it will be. No business is immune to the effects and keeping business strong for the future remains our priority.”
Clifford Chance says, “Our teams are always a source of huge pride — fantastically talented, motivated and collaborative and never more since the virus has begun to spread. Over the coming months our aim is to keep these teams together and to work shoulder to shoulder with our clients who need our support now more than ever.”
Next Steps
As the country is starting to relax restrictions over the next few weeks, it will be interesting to see how law firms respond. Several firms are stating they plan to have staff return to the office in mid-July, while other firms have no plans to return to office life in the near future (Minter Ellison). Most firms will probably take a conservative approach to returning to normal as they wait to see what the economic fall out will be for their business and indeed the AFR on 15 May ran with the Legal Affairs headline “Law firms in no rush for return to offices.”
That said, Clifford Chance has re-opened from 18 May in both Sydney and Perth, and many offices in Perth and Adelaide are already either open or re-opening in the small firm and mid-tier market. Ashurst too has announced an 18 May opening in Perth and HFW opened on 11 May in Perth.
Interesting times…
