Salary cuts - everyone at our firm recently had their salaries reduced to weather the crisis. By all accounts, the firm has had its best years on record the last two years. Cont’d...

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The only thing I can think of is that they’re trying to balance the budget without reducing the rainmakers’ distributions by much

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Are law firms ill-suited to weather economic downturns? Do they keep a lot of capital or distribute the bulk of it to the partners at year end? It seems crazy to me that we’re already at this point financially.

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AA1, it’s not about “next week’s payroll” - it’s about the next several months/year in which revenue is continued to be projected to decrease (in many cases dramatically), and with great uncertainty about the duration. Even when this is over, the bounce back won’t happen immediately. Law firms are service providers and their expenses are almost entirely the very high salaries of their employees. For the most part, modest salary cuts (particularly when they increase for those at the top, and with an emphasis on avoiding layoffs) strikes me as a prudent fiscal strategy to ensure the firm remains healthy over the longer term in the face of a massive global crisis.

OP that's what I keep thinking. Esp when firms started this 2 weeks in. Like, really? At least for some of these bigger firms. I get that the smaller a firm is, the less financial security they may have. But Cadwalader? Makes no sense to me unless these firms were already in bad shape before this happened.

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I assume they're reducing salaries to help build up the cash cushion.

My firm had a pretty good month for collections in March actually, and we are very fiscally conservative (large cash cushion), so no changes here yet.

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I'm told that my big law firm operates on a no debt basis which means when the lean times hit, they aren't sandwiched by debt service AND expenses. I have no idea how common it is for firms to borrow money but I think those firms that do so are the ones making cuts. You can't reduce your loan payments as easily as payroll.

This recently happened at my firm as well. Everyone from attorneys to staff took a small-ish (depending on your POV) pay cut. Our firm also supposedly has no long-term debt, has all lines of credit available, and has had fantastic years recently. I’m grateful to still be employed, but we were all pretty shocked that the pay cuts happened so soon. We’re also still concerned that they will be furloughing/laying off associates soon, so that isn’t helping the stress management - which in turn is harming productivity. We also now can’t enter non-billable time into our timekeeping program, so if you spend a few hours doing a CLE or admin stuff etc, it looks like you sat on your ass most of the day to management. I hope this is as bad as it gets, but the lack of sleep is making it hard to churn those billables out. Still happy to be where I’m at, just concerned is all (like everyone else I suppose).

The larger problem is the future outlook not necessarily the past fiscal performance. Most big firms are seeing relatively “normal” billables right now but collections are way down and there are 100% going be clients who can’t pay their bills for services already provided. The lack of actual collections is what is driving lots of cost-cutting right now

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