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This article, like many others, was first published exclusively for long-term supporters, 14 hours before everyone else got to read it.

Is this crisis over? CAM (the first to retain salaries) to pay out by Diwali but postpones bonus to 2021

In part, the firm has cited stronger billings than expected, though this doesn't mean law firms are out of the woods.

Corona and economic woes will definitely not end by Diwali but at least CAM salary lockdown will
Corona and economic woes will definitely not end by Diwali but at least CAM salary lockdown will

Cyril Amarchand Mangaldas has announced internally that it would pay out by Diwali the 10% to 30% of fee-earners’ salaries that had been deferred since May 2020.

“Whilst the economic situation is challenging, the need for quality legal advice has increased manifold,” commented Cyril Amarchand Mangaldas managing partner Cyril Shroff.

“The first five months have surpassed our expectations and hence we decided to give some relief to our lawyers,” he added. “They have worked very hard.“

Up to 30% of fee-earners’ salaries (for those who earned more than Rs 25 lakh) had been held back but will now be paid out by Diwali of this year, around 14 November, the firm has announced. The development had first been reported Bar & Bench today.

Diwali bonus merged into 2021 payment, case-by-case increments, partners TBC

However, life is not completely back to business as usual at CAM: bonus payments - of which 30% is traditionally paid at CAM around Diwali time - would be deferred and merged into the upcoming March 2021 bonus payment, the firm had said.

Furthermore, while associates in non-Covid times usually automatically advance into higher pay bands of post-qualification experience (PQE) in years, this year the PQE bumps will be decided on a case by case basis, depending on individual interviews and performance appraisals with fee-earners.

We understand that no decision has yet been made regarding whether Cyril Amarchand Mangaldas equity partners - who had agreed to not draw profits this year - will be back to status quo, though we understand that it is being mulled over.

Benefits of foresight

In late April, Cyril Amarchand Mangaldas (CAM) had been first large Indian firm (after litigation firm Agarwal Law Associates) to hold back;; part of fee-earners’ salaries.

With the benefit of foresight, at the time we were facing the early days of a potentially catastrophic global pandemic and recession, and CAM aggressively battened down the hatches (facing some flack) hoping that taking early measures could hedge against more serious pain later on.

Around that time, David Morley, the former Allen & Overy global senior partner who had steered the firm through the 2007-08 financial crisis and recession, had written a widely-shared article in the UK's Legal Business magazine. His advice was sensible, if perhaps less emotional and more direct about such things than the Indian legal profession has been used to:

Few will have taken their current leadership role with any of this in mind. It’s natural to wish it wasn’t you having to take such painful steps. But there’s no-one else. That is a leader’s burden. Deal with it with decisiveness, openness and fairness in equal measures.

It is worth mentioning at this point that Morley also happens to be on Cyril Amarchand Mangaldas’s strategic advisory board, since 2017.

And hindsight: No size fits all

Even so, with the benefit of hindsight, even those early bearish projections were probably too bullish for the reality that we are now likely facing a domestic and global depression the likes of which has not been seen in a generation.

As such, while Cyril Amarchand Mangaldas’ decision to will be welcomed by fee-earners and will put some pressure on other firms’ management in the market to also loosen their restrictions and purse-strings, every firm has more or less taken its own decisions on how to deal with the pandemic.

Measures have included nearly everything from salaries or bonus freezes or reductions, to cuts for equity partners only, to deferrals of fresher starting dates, to no measures at all:

Clearly very few firms believe they will emerge from this crisis unscathed and the worst is more than likely yet to come.

But the differing reactions also reflect two other things.

First, unlike foreign and international law firms, where firms in the same bracket such as the Magic Circle have similar finances and strategies, in India, no two firms are alike and each equity partnership or set of promoters have vastly differing reserves of cash, appetites for risk and client and work profiles.

Second: while many have strong suspicions, most clients don’t yet know exactly how bad things are going to get for their businesses; the same will go for law firm managing partners.

Photo by Nikkul

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