Goodbye Hourly Billing: Alternatives to Charging By the Hour.

The legal profession is not known for responding quickly to change particularly when that change affects the all-important matter of legal fees. For many years, hourly time billing has been the most commonly used method of charging for legal services with profit being the main aim. Whilst it may be profitable to law firms, it is an inefficient and ineffective method from the clients' point of view.

The Old Way: Traditional Approach to Charging Clients.

Traditionally, your law firm delivers its invoice with a narrative or schedule of the work done by the various legal professionals and the hours taken to perform the work. Many recipients of this narrative will not be familiar with the legal services procured and may not recognise that work recorded by a senior lawyer could have been done by a paralegal, or when the recorded hours are excessive. Anyone paying for legal services is entitled to expect transparency and accountability, neither of which is obviously apparent in the hourly billing scenario. Although hourly billing remains a widespread practice throughout the legal profession, there are other options that may prove more attractive. These options are based on the idea of being fair and reasonable by giving value to the client rather than simply achieving profit, with the value of the service largely based on the clients' interpretation of value. The calculation of value is based on the client’s understanding of what services the lawyer is to provide, so although hours and rates remain important, they are not the determining factor. Efficiency, effectiveness and rewards are the goals, not the number of hours billed.

The New Way: Alternatives to Hourly Billing

At You Legal, it's important clients remain at the forefront of our services. For this reason, we provide alternatives to hourly billing and lawyer cost

1. Fixed or flat fee billing

   With fixed fees both the legal professional and the client have certainty on where they stand from the outset. Both agree on a set fee to be paid for a particular service based on an estimate of what the work will involve and who will carry it out. This helps clients budget their legal expenditure in advance of receiving the invoice. It also helps from an efficiency point of view in that the allocated work can be scheduled with the legal firm to be completed by a set date.

2. Capped fees
   Capped fees may involve an element of hourly billing; however, an agreed ceiling will have been placed on the particular matter. As with fixed fees capped fees should not bring any surprises. It enables both the client and lawyer to work within set parameters; the clients can budget accordingly and the lawyer has an understanding from the outset of what the client’s expectations are. 

3. Conditional fees

   Under a conditional or “no-win no-fee” arrangement the lawyer takes a previously agreed-upon fixed fee, or a set hourly rate, in the event of successful recovery. An “uplift” of the fee may also be collected depending on the size of recovery and capped at certain amounts. Conditional fees are not to be confused with contingency fees (whereby the lawyer gets a certain percentage of the settlement) which are still prohibited in Australia. It's very common to have the "no-win no-fee" in cases of personal injury claims, for example.

4. Blended hourly rates

   This option involves a calculation of the rates of all of the employees who will be working on the matter, including trainees and paralegals. Hourly rates will be charged based on the average of all of these employees rather than on a hierarchy of rates based on each legal adviser. From a client's perspective, they only have to understand one hourly rate which can be agreed upon at the outset.

5. Retrospective fees

   The parties will determine the value of the work AFTER the matter has been concluded. This is not something we do at You Legal and is generally reserved for large cases and corporate matters.

6. Relative value

   The client and the legal adviser will design a schedule of services setting out the subject matter and task.  Each task will be assigned an agreed relative value or multiplier, with some tasks being more "valuable" than others.

7. Task based billing

   The legal adviser will prepare a budget prior to performing a specific task and cannot exceed the budget without express permission. This is similar to capped based billing.

8. Discounted billing

   Discounted billing entails offering a discount on the bill or on the hourly rates, provided the client agrees to procure a large volume of business from the law firm. These arrangements tend to occur when the client and legal firm set arrangements for ongoing work.

What About Extra Costs?

It should be remembered that disbursements and expenses MAY be added to the bill. These can include items such as:

• administration costs such as photocopying and postage

• undertaking searches and obtaining required certificates

• court and filing fees (if applicable)

While it can be hard to quantify these costs upfront, an experienced lawyer should be able to provide an estimate based on previous clients. Each of the alternatives to hourly billing may have its own drawbacks and you should always discuss the matter thoroughly with your legal adviser before selecting the option suitable for you.

The You Legal Way: De-Mystifying Billing

As a leader in the new way of offering legal services, we place high value and importance on ensuring our billing is clear and transparent for our clients. We work with our clients to come to a suitable agreement that suits BOTH parties. If, for example, you're on a budget we can arrange for a fixed fee solution giving you the certainty of costs. If, on the other hand, you have a complex matter that is hard to estimate hours required upfront, we can work on other fee arrangements to provide you with full viability of the work being completed. We will connect you to a lawyer that is right for your matter, at no upfront cost to you. Get in touch with the team today.

*This blog is for general guidance only.  Legal advice should be sought before taking action in relation to any specific issues.