TUE, AUG 11, 2020 – 5:50 AM
Several well-known law firms in Singapore, including one of the Big Four, have imposed pay cuts across the board – a move not seen in previous crises. PHOTO: ST FILE
Singapore
SEVERAL well-known law firms in Singapore, including one of the Big Four, have imposed pay cuts across the board – a move not seen in previous crises.
Dentons Rodyk and Big Four firm WongPartnership are among the largest law firms here that have announced firm-wide wage cuts, with both doing so by stripping out lawyers’ “front-loaded” bonuses.
Local law firms have over the past decade supplemented lawyers’ basic salaries with bonuses that are “front loaded”, or paid out in advance every month.
Lawyers and staff at Dentons Rodyk have had their advance bonuses cut since April this year.
Senior counsel Philip Jeyaretnam, who is the firm’s Asean chief executive and global vice-chair, said the move was “simply about being prudent” in the face of Covid-19.
“By March of this year, it was clear that 2020 was no normal year and so we stopped paying advance bonus from April onwards to all associates and to staff. Naturally, partners, especially senior partners, reduced their drawings the most,” he told The Business Times.
The firm will review the situation at the end of the year and decide how much additional bonus to pay, and to whom to allocate it.
“Some work, especially dispute work, restructuring and refinancing work has actually increased and some people are working harder than ever,” Mr Jeyeretnam pointed out. He also noted that the firm had preserved all jobs and hired 13 practice trainees.
At WongPartnership, lawyers across various seniorities will have their front-loaded bonuses cut by between 5 and 10 per cent from August, with these adjustments “revisited periodically”.
In response to BT’s queries, partner Joy Tan said that Singapore is facing unprecedented economic challenges, with the economy expected to shrink by between 4 and 7 per cent this year.
“The firm has a similar conservative business outlook on the year. While we remain financially healthy, and retrenchment is not an issue for us, we have chosen to adopt prudential measures on pay,” she said.
These paycuts are “not purely prudential belt-tightening measures”, she said, but designed to give the firm flexibility in paying a differentiated bonus to reward the more deserving performers, Ms Tan said.
There are plans to restore the front-loaded bonuses in 2021 or earlier, if the outlook improves.
“We have encouraged our people to not look at this as a cut but as a withholding, in that deserving performers may well still be paid the same amount in bonuses as before, at the end of the financial year,” she said.
Data from London-based legal research firm Chambers and Partners showed WongPartnership and Dentons Rodyk are staffed by about 300 and 200 lawyers, respectively, in Singapore.
A spokesperson from Drew & Napier would only say that the firm has not implemented any pay cuts.
Allen & Gledhill and Rajah & Tann, the remaining two Big Four firms, did not address queries on whether they have implemented such cost-cutting measures.
Local mid-sized firm TSMP Law Corporation had told BT in May that its partners would be taking a 25 per cent cut to “stand in solidarity” with clients.
While the firm has not implemented any pay cuts firm-wide since then, it will be adjusting starting pay for newly qualified lawyers down by 8 per cent, for those getting called in August.
“If the situation worsens, however, the firm could take further action to restructure all our lawyers’ pay,” joint managing partner Stefanie Yuen Thio told BT.
“We would try to make this a temporary cut, however, with an intention to reinstate pay levels in a year or two. The work will come back. Law firms just need to survive the cash flow crunch until that happens. That’s why we decided to do an early pay cut for the partners to manage our cash flow more prudently.”
There are whispers of concern over retrenchments later if business activity continues to languish, reflecting the severe economic impact from a global pandemic on the professional services sector.
Some law firms are reducing work hours or encouraging lawyers to go on sabbaticals, moves that are fairly uncommon in the legal sector here, even in past economic downturns.
When BT reported in May on law firms tightening their purse strings, most were doing so by freezing increments, hiring, or slicing partners’ profit distributions.
But recent moves seem more extensive, impacting junior associates and even staff who are not lawyers.
An associate at a Big Four firm expects the firm to be harder hit due to its large volume of corporate work.
A junior lawyer at another local, established law firm said that his firm has also implemented a cut of 10 per cent to associates’ pay. Partners at the firm were said to have taken a larger cut, but the proportion was not disclosed, said the lawyer, who spoke to BT on the condition of anonymity.
“(The management) announced the cuts a month before circuit breaker. They sent an e-mail and said that times are challenging … If it deteriorates, the cuts could get worse,” he said.
TSMP’s Ms Yuen-Thio said that during past economic downturns, the legal sector saw hiring slow and pay increments moderated. Because the economic pain tended to be concentrated in certain geographical areas, lawyers could also find jobs in countries that were less impacted.
But Covid-19 has dealt a different hand.
“The virus has been agnostic about political leanings and geography, and with most business sectors badly affected, the law firms that support them have started to feel the pinch,” she said.
Lee Shulin, co-founder and director at Ansa Search, pointed out that firms with strong litigation, disputes, as well restructuring and insolvency practices are more resilient.
“They have greater leverage when the economy takes a turn,” she said.
International law firms, including those with a presence in Singapore, appear to be the ones who are taking more drastic measures,
US outfit Reed Smith has rolled out several rounds of austerity cuts, which saw pay cuts across all levels – including a 40 per cent reduction in monthly draws by equity partners – as well as layoffs in the firm’s largest office in London.
London-headquartered Norton Rose Fulbright has asked staff to volunteer reducing their working hours by up to 20 per cent until next April. It took a similar move in the immediate aftermath of the global financial crisis.
The firm’s Europe, Middle East and Asia arms are also deferring partner distributions and staff salary increments for the foreseeable future.
Checks on the Law Society’s careers portal still show a number of mid-sized and smaller law firms, such as Yeo & Associates and Eldan Law, looking to expand their litigation practices.
But recruiters said they have also been receiving a larger number of queries of late particularly from junior lawyers, with some considering leaving practice to serve as in-house legal counsels.
“Their workload has remained largely the same, if not more, and would be understandably disgruntled in having to take a pay cut despite their efforts,” said Clement Tan, a senior consultant at Space Executive.
“Some see the pay cut as a time to reassess where they are, becoming more open to considering an alternative career in-house or with another firm.”