Legal Topics

29-Jun-2017

Lawyers and Billable Hours

The billable-hour system is a modern fixture of the legal profession. For many attorneys and law firms, it is a way of doing business, nothing more or less. For clients, though, it can be a financial nightmare. It all depends on which end of the bill you're standing.

According to the practice, a lawyer or legal firm sets a pay rate for each hour they spend on a case or legal consultation, which is charged to the client. The revenue from billable hours is broken down in different firms. An attorney with a solo practice will derive most of their salary from the hours spent working on a client's behalf, while paying other expenses out of their own pocket. With a larger firm, however, the partners and associates usually receive a salary independent of their hourly rates. The money earned from billable hours go toward infrastructure and other professional needs.

Most law firms require their associates to work an average of 2,000 hours annually. If the firm set its hourly rate at a figure like 300 dollars per hour, then the annual revenue their associates would earn would be around 600,000 dollars. This should give you an idea of how effective and profitable billable hours can be to the legal profession. For partners in a legal firm, billable hours and their revenue are a way of measuring their associates' productivity and worth.

Even so, every client of an attorney or law firm should be protected from legal fees and bills that waste their money unnecessarily. Consider the following guidelines when you're evaluating how fair a lawyer's billing practices are.

* The fee should be agreeable to both the lawyer and their client, taking into consideration the client's value and financial standing.

* The client should be involved in working out the scope of their case with their lawyer's help.

* The fee should match the amount of effort that the lawyer and their associates have put into the case.

* The fee should at least be rewarding to the lawyer for the effort they put in, the risk they incurred, and the results they achieved.

However, not all firms are staying with the billable-hour model. Some are adopted a fixed fee format or asking clients to pay a monthly retainer fee, for which a lawyer will be available for any and all services. Some law firms are also adopting a performance-based pay system, looking more at the quality of work done than the quantity. And, of course, public interest firms and government legal groups are far less likely to use billable hours in order to address public needs.

Image by Mike Licht on Flickr