Most law firms have implemented a furloughing strategy, looking at reductions of up to 40% in headcount to survive the coronavirus crisis, according to a survey.
It found that furloughing was preferred over reducing staff hours or pay, while partners were sharing the pain with lower drawings.
The poll of over 200 firms – the make-up of which was not specified – revealed that 77% have communicated to staff a programme of furloughing.
The Institute of Legal Finance & Management and accountancy firm Saffrey Champness, which conducted it, found that the majority were looking to furlough up to 40% of staff, but more than a fifth were looking at 40-60% of staff, with nearly 7% furloughing more than 80% of the workforce
Some 18% have looked to vary contracts. “It seems that the contractual and practical challenges of reducing staff hours, which would presumably require a fair and consistent approach across the board and present its own unique set of challenges, is not attractive to firms at this stage,” the researchers said.
“Furthermore, 63% of firms have so far not introduced pay reductions, while for those firms that have taken this step, most are relatively moderate at no more than 20%.
“Also of note is the fact that only 6% of firms have started redundancy negotiations with staff. For now at least, firms’ attentions are apparently fixed on the longer term and what the partners want their practice to look like once they have weathered the storm.”
The survey found that a good proportion of firms were first looking to their partners to help ease the financial pressure – 42% were reducing partner drawings and 36% still considering it – and most have not yet rescinded job offers.
Of the 65% of firms that have recently made job offers, 77% have chosen not to withdraw them.
However, 53% of the firms that had planned pay rises or job promotions this month have cancelled or deferred them, while only 28% of firms with capital expenditure plans for the coming year still seeing those through.
The survey concluded: “It is clearly too early to predict the full financial impact of the coronavirus, but firms are opting for something of a gloomy outlook. Almost half of our respondents – just over 47% – are predicting a fee reduction of more than 25% against original expectations for the coming financial year.
“It will be interesting to see how those predictions shift over time and, in light of the current appetite for furloughing staff, how that will ultimately impact on profitability.”
The organisers plan to repeat the survey every month.
A separate survey we reported yesterday found that week three of lockdown saw the start of a cash squeeze on law firms, with no money yet from the government, and predictions of a grim summer.