Why the Billable Hour Is Here to Stay

 

While you may grind away on files day in and day out through six-minute intervals, tracking the time can prove distracting and burdensome. The billable hour remains the standard method for billing with lawyers, and this has been the standard for decades. Despite the longevity of the billable hour, plenty of lawyers believe they can find a better way to bill their clients.

The Argument Against the Billable Hour

Lawyers from a variety of fields have raised arguments against billing by the hour. One of those arguments is how you only have so many hours in the day that you can work. In addition, an hourly billing setup fails to acknowledge how different legal services will have differing value. Some have made the claim hourly billing encourages inefficiency and incompetence because the longer it takes a lawyer to finish the job, the more they get paid. This shows a conflict of interest because a lawyer might feel tempted to spend the maximum hours on a file.

Does the Billable Hour Remain the Standard?

Gradually, lawyers have started to charge through alternative methods. Some of those methods include:

  • Flat fees
  • Results-based fees
  • Contingency fees
  • Fees by stages

In today’s world, a client asks more value for his dollar, and plenty of lawyers are happy to accommodate. Still, the billable hour reigns supreme even despite talk of a massive shift. The billable hour hasn’t taken hold as of yet. However, it has been growing. In fact, a recent study found how the alternative fee arrangements were up five percent from several years ago to 22 percent since.

Revolutionizing the Law Industry

Plenty of firms have seen this and started to shift their own law practice out of the curiosity of what a billable-hour free firm might look like. Since the early 1990s, lawyers have predicted the eventual end of the billable hour, but it has never truly ended. Until a more alternate billing comes, it’s unlikely that the billable hour will ever fully go away. In fact, some law firms will always prefer it, and unless the clients demand a change, the billable hour serves both lawyers and clients in a way where an alternative arrangement might prove to be more difficult.

 

Education of the Client

Many times clients will ask for the alternate billing, but in the end, they wind up choosing the hourly billing because they don’t know how to judge if the alternative arrangement will be fair. During Bill Rice’s tenure at Bennett Jones, he stated that his national firm offered the alternate billing proposal.  He continued by explaining their process of moving forward, “While we’ve moved forward with breaking the billable hour, we still haven’t reached the appropriate level of comfort with alternative billing.” Essentially, clients are unable to find a better way to judge the value or to maintain control over it.

This is where research comes in play. If you decide to want to take an alternative route, education is key. By explaining the process, average cost, and the highest potential cost, your client can decide which avenue he or she may want to take.

Where Alternative Billing Does Best

In some cases, the billable hour continues to be the best fit for the attorney and/or law firm. This includes the markups and discounts and how much time a lawyer puts into the case. Sometimes blended rates come into play due to work getting divided amongst the firm. In these circumstances, you will experience a blend of hourly rates.

Where fixed-fee billing (say that five times fast) works best, might be when an event an activity is scheduled. Some of the possible examples include:

  • Patenting
  • Immigration visa

Fixed-rate billing also allows an attorney to exit a case with less worry. Sometimes with the billable hour, there’s that worry of a possible lawsuits malpractice. When you lay everything on the table, the client knows what he’s getting himself into. As a result, you have a more satisfied group of clients because they feel they got the value out of what they paid for.

The Problem of Efficiency: The Billable Hour

You could spend up to an hour trying to fix a leaky faucet and getting nowhere in the process, even though the problem is fairly simple. The same could be said about the billable hour. You want to provide attorneys with some incentive on why they should work hard to finish the case fast. It’s true that some of the other billing methods might not necessarily be cheaper than the billable hour, but it gives clients a fixed budget to work with and peace of mind knowing it won’t go higher.

The billable hour isn’t likely to go anywhere in the future. New methods of billing will, however, probably come up as lawyers get more creative on how to bill their clients for their legal services. The world today focuses more on value-driven legal services. For that reason, it seems like a good incentive to provide lawyers with a reason to up the quality of their services while giving clients predictable budgets they can count on to stay the same.

 

Sources:

https://www.theatlantic.com/business/archive/2015/10/billable-hours/410611/

https://www.lawgives.com/guide/551c6124777777655d7a0000/12-Reasons-Attorneys-Should-Charge-Flat-Fees

https://law.yale.edu/student-life/career-development/students/career-guides-advice/truth-about-billable-hour

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