A Thin Reed: London lawyers lose out as Reed Smith announce layoffs
July 8, 2020
2 min read
What's going on here?
Reed Smith has furloughed staff, cut jobs and lowered salaries across all of its offices.
What does this mean?
The firm took several cost-cutting measures in early June, including the cutting of around 20 solicitor jobs in the London office which has approximately 350 lawyers, and the furloughing of about ten professional support staff. Any Reed Smith lawyer in any of the firm’s offices earning more than USD 100,000 (GBP 80,000) will see their salary cut by 6% until further notice. Across the entire firm, personal assistants and certain professional services staff will move to a new, four-day working week. Unlike their counterparts at Eversheds, staff at Reed Smith did not have a choice in the matter.
These measures build on earlier cost-cutting. In March, the firm reduced equity partners’ annual profit drawing by 40% and non-equity partners’ drawing by 15% in an attempt to conserve cash. At that time, it also lowered associate, counsel and salaried partner salaries by 12, 12.5 and 14% respectively. The firm’s managing partner has stated that the firm plans to reverse most of these cuts eventually.
What's the big picture effect?
Reed Smith is one of the first global law firms to implement such comprehensive measures, and when put into context, these cuts highlight the difficult choices faced by law firms. Allowing partners and associates to bear the brunt of any cost-cutting may have the most significant effect; however, it could result in partner poaching and weakened NQ retention and recruitment figures if these cuts continue during a period of economic recovery. Cutting support staff may be fair if their work dries up but will more likely result in highly-burdened trainees and associates picking up support tasks in addition to their regular workload. Support staff cuts may also be “too little too late”, given that such staff are paid only a fraction of what partners receive and are generally few in number.
Notably, Reed Smith did not force some of its future trainees to defer their training contracts in London, unlike HSF, CMS, DWF and Pennington Manches. This decision highlights a difference in how firms choose to impose their job cuts. Some will attempt across-the-board cuts that do not discriminate against loss-making practice areas, while others only fire or postpone employment in underperforming areas. The latter can be advantageous as it ensures that profit-making sections of the firm remain intact but could result in the firm lacking the staff to serve its clients adequately when recovery comes.
Law firms may mirror Reed Smith’s decision to have the best of both worlds by removing unviable lawyers while otherwise keeping the firm’s structure, including the inflow of younger talent into the London office, as similar as possible.
Report written by Darinka Lipovac
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