Firms should be deeply ashamed of cuts to employee remuneration

By Anonymous|26 April 2020

There is absolutely no excuse for partners and executives not to reach into their pockets to stand by their obligations to their staff during this pandemic, writes Anonymous.

Over the last week, I’ve seen a number of large professional services firms unilaterally cutting staff remuneration.

Some measures taken by firms have included cutting hours, pro-rata adjusted salaries, requesting staff take annual leave or even purchasing annual leave. Elsewhere, salaries have been cut while insisting on no changes to working hours, and one firm even had the impudence to make their cuts “opt-out”. 

There are also rumours that a number of firms are selectively putting under-utilised employees on “sabbatical” at a tiny fraction of their actual salaries.

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The unspoken but palpable threat in these reductions is that if an employee does not accept the proposed compromise, then they’ll be made redundant into a crashing economy or stood down indefinitely on a tiny fraction of their salary. 

Putting to the side any potential illegality, these actions are unbelievably unethical and should be roundly condemned by our industry. 

It is a fundamental assumption of the labour economy that in any employment relationship, the employee trades his or her labour for fixed remuneration, while the employer keeps any surplus, and necessarily takes the risk on any deficit. 

If an employee is ready, willing and able to provide services, but market circumstances change, an employer does not simply get to abandon their obligations so that they can shore up a surplus for themselves.

It is not enough to say, as some firms have, that partners are also taking a cut – equity partnership distributions (which are paid out of profits) should be reduced to zero before the first employee is threatened (by implication or otherwise) with redundancy. 

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The situation might be different if employers were facing imminent insolvency, but we’re barely a month into this pandemic and very few professional services firms would have even billed all of their work in progress, let alone seen a drop in actual revenue. 

Indeed, we’ve had uninterrupted prosperity in Australia for the better part of 30 years, and interest rates are currently at absolute record lows. Our biggest firms should have plenty of capacity to borrow against past or future profits to meet their moral obligations to their employees.

While not all large professional services firms are equally culpable, let it be said clearly that there is absolutely no excuse for partners and executives not to reach into their pockets to stand by their obligations to their staff during this pandemic. 

Our colleagues in the medical profession are dying. I think the partnership of our largest professional services firms can stand a little more discomfort.

Anonymous is an Australian lawyer.

Firms should be deeply ashamed of cuts to employee remuneration
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