Alternatives to the billable hour

By Audrey Herrington

There are few things that inspire such extreme reactions in the legal community as the billable hour.

Whether you love it, or haven’t taken a vacation in three years because of it, it is the most common method of measuring productivity and determining compensation for attorneys, particularly those that work in law firms.

The billable hour has been used for generations—not long after your grandfather walked to school uphill both ways, he sat down at his desk and churned out billable hours the same way we do now.

Firms love the billable hour. Lawyers bill a set rate, typically ranging from $200 to over $1,000 per hour for every hour spent working on your case. For those that have never billed an hour, this includes everything: client phone calls, emails, texts, legal research, etc. Your lawyer might answer your texts within minutes because he likes you, but the hourly rate certainly doesn’t hurt.

For clients, it’s a different story. It is almost impossible to tell when signing a fee agreement how long a case will go on. Even when clients can negotiate a lower hourly rate, the hours are still an unknown.

The billable hours model thrived in a world where information was not so readily available; however, technology has made it such that people can seek out legal information themselves or turn to companies like LegalZoom to perform basic legal services. Technology has given prospective clients alternatives, and when faced with knowing cost upfront and knowing later, people choose the former.

So, how can firms combat this shift and keep prospective clients away from the DIY-perspective? There are several fee structures that can be substituted for or work in conjunction with the billable hour:

Flat Fee Arrangements. In a flat fee arrangement, a lawyer gives a set price for a specific service. Example: lawyer drafts estate plan for $1,000.

Contingency Fees. In a contingency fee arrangement, a lawyer is paid based on a percentage of the recovery or settlement. Example: lawyer is paid 33% of the settlement for a personal injury case.

Fee Cap. With a fee cap, a lawyer will bill hours up to a certain amount. Once that amount is achieved, the client will not pay anymore for that service. Example: lawyer drafts a complicated estate plan. The lawyer sets a fee cap at $3,000, and bills hourly up to that amount.

There are some situations where there is no alternative to the billable hour, such as travel and courtroom litigation. But most legal services lend themselves to at least one alternative, and it is always key to remain transparent with clients on what they can expect to pay.

The use of hybrid and alternative models for billable hours ensures that clients receive legal services that are customized to their specific needs and keeps law firms competitive against internet competitors.

Audrey Herrington is a 2018 graduate of Saint Louis University School of Law. She provides insight for newly minted lawyers in the fast-changing legal field.