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One Lawyer Layoff Saves an Average of $250K

Posted Feb 6, 2009 7:54 AM CST
By Debra Cassens Weiss

Law firms looking to cut budgets get more bang for their buck by laying off lawyers rather than trimming other costs.

About 85 percent of a law firm's budget goes to pay rent and personnel costs, the National Law Journal reports.

"There's only so much you can save by pulling the tea and cookies out of the conference room," one law firm chairman told the National Law Journal. "The rent you're stuck with, so you're left with this huge megillah of compensation."

Law firms that lay off personnel save an average of about $250,000 for each lawyer axed and $100,000 for each support staffer, consultants and law firm leaders told the NLJ.

But some of the savings from layoffs is initially eaten up by severance payments, according to the law firm chairman, who spoke to the NLJ on the condition of anonymity. He said that, generally, the firm pays about $7 million in severance for every $10 million saved in compensation.

Another anonymous law firm chairman told the legal newspaper that it takes about nine months before any savings are realized by lawyer layoffs.

Comments

1.

Barbara Res
Feb 6, 2009 9:00 AM CST

If they can do the same business without a given lawyer or assistant, why are they there in the first place?
What a ridiculous idea.  Just fire someone.  Make sure you have too many lawyers first.  Then slap yourself for running an inefficient and wasteful operation in the first place.

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2.

Leigh
Feb 6, 2009 11:18 AM CST

Probably because market conditions change.

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3.

Kathryn
Feb 6, 2009 12:24 PM CST

Yes, and those market conditions will change again.  I’ve seen it with several rounds of layoffs over the years - the firm lays off some associates when the market slows, and when it heats up again, they don’t have enough experienced lawyers to do the work they want to take on.  (Not that it usually stops them, so quality of life and, perhaps, quality of work suffer.) 

They also find that, when they want to go back out to the market to hire replacements, they are competing with everyone else for experienced associates who are simply no longer there. It’s not like hundreds of laid-off associates are sitting around waiting for the market to turn; they’ve moved on and done something else, either with another firm or, particularly for the corporate-types who are more affected by market downturns, left private practice entirely.

Of course, after every recovery I’ve witnessed, firm management swears they’ll not do layoffs again because they can never recover the lost talent.  Yet memories are short ...

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4.

rajanassociaes
Feb 6, 2009 11:22 PM CST

We think lay offs should not be publicised .It has a negative impact for the Firm and the Lawyer laid off.Recession is a part of life and if downsizing is done there should be no fanfare about it.

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5.

B. McLeod
Feb 6, 2009 11:52 PM CST

That is one way to look at it, but here in the United States, the assumption should be that layoffs will be publicized.  The publicity has no negative impact for the lawyer laid off, because the event is not performance related.  Disclosing layoffs may have some negative impact for the firm, but it is at least partially balanced by the fact that they are doing the right thing in acknowledging that the laid off lawyers were not let go for performance issues.  When the recession is over (as someday, it will be) firms that have handled layoffs well, and firms that have not had layoffs (if there are any) will have (deservedly) a recruiting advantage.

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