How the Legal Industry Is Navigating Hourly Billing and Flat Rates
Executive Summary:
Legal billing is changing as clients seek greater predictability in legal costs and artificial intelligence begins to reshape how lawyers approach certain types of work. While hourly billing remains a familiar model, some lawyers are increasingly using flat-rate pricing. For law firms, these changes also create new demands for accurate time tracking, billing and invoicing, particularly when different clients and matters require different approaches.
Legal Billing Depends On More Than The Type Of Law
There is no single approach to billing across the legal industry. Steven Greenberg, an intellectual property lawyer, said the way a lawyer charges can depend on the type of legal work, the client and even the lawyer’s approach to practicing law.
Hourly billing has long been associated with the legal profession. Under this model, lawyers record the amount of time they spend working and bill clients according to their hourly rates.
“The traditional 1950s white-shoe version of the lawyer was an artist, a bespoke practitioner delivering services,” Greenberg said. “Their value is their time, and you pay for their time. And you pay for the time in really only one of two ways. The first way is they do the work, they send you a bill. I worked this many hours, and these are the different things I did.”
That model makes accurate timekeeping an important part of the billing process. For firms using hourly billing, legal time tracking software can help organize time entries alongside the client, project and other information associated with the work.
Why Some Lawyers Are Turning To Flat-Rate Billing
Hourly billing is not the only way lawyers can charge for their services. Flat-rate billing gives clients a predetermined price for a particular service or matter rather than tying the final cost directly to the number of hours worked.
Greenberg said he has used flat-rate billing extensively, particularly when working with large corporate clients. He began using flat-rate billing when he worked for a large corporation, and adopted the rate card the corporation gave him to every client for convenience.
For clients, one potential appeal of flat-rate billing is knowing the expected cost before work begins. For lawyers, however, the model can make estimating the amount of work involved particularly important.
Billing Expectations Can Vary For Smaller Clients
Large corporate clients are not the only group affected by changes in legal billing. Smaller businesses and individuals may have less familiarity with how legal services are priced in the first place.
Greenberg said that can make communication between lawyers and clients an important part of the billing process.
“Most clients that are not large corporates, so you know a lot of startups who don’t have a lot of involvement with lawyers, they don’t even know what billing systems exist,” Greenberg said. “They have no idea how the relationship is supposed to be … No one really knows what a lawyer is supposed to cost, so as a law firm, that’s your job to train your client, train them in what to expect with billing.”
What Changing Billing Models Mean For Law Firms
As lawyers work with different billing arrangements, firms still need reliable systems for recording work and turning those records into accurate bills.
For firms using legal billing software and time tracking and billing software, some of the key functions include:
- Recording billable time and expenses
- Connecting time entries to clients, projects and activities
- Managing different billing rates
- Handling fixed-price items alongside billable time
- Generating and managing invoices
- Supporting legal billing formats such as LEDES
The Future Of Legal Billing May Not Be One-Size-Fits-All
The legal industry does not appear to be moving toward one universal billing model. Hourly billing remains relevant, while flat-rate pricing can provide greater predictability for certain clients and services.
For law firms, adapting to those changes may require more than reconsidering how services are priced. Accurate timekeeping, billing records and invoicing remain important pieces of managing legal work, regardless of whether the final price is based on an hourly rate or a predetermined fee.
Enter Your Hours supports billable time, fixed-price items and expenses, while allowing rates to be connected to employees, clients, projects, activities or combinations of those records.