What can be added to the hourly rate debate?

In short, nothing. There are HUNDREDS of posts on this topic on LinkedIn by business experts, and even one or two by lawyers. All I can attempt to do here is distil the key points as put by both sides, sum up and add my own tuppence, which has almost certainly been said by someone else at some point. Here we go.

The arguments against the hourly rate

RIP Reginald Heber Smith and thanks for your charging legacy

Debate? There isn’t one. The hourly rate is dead, yet it thrives as a living zombie. Despite its many death-throws and well-established total unsuitability for purpose, it resurrects itself and reigns supreme at your law firm. Clients and lawyers suffer daily in its strangling grip. The hourly rate is a religion which defies all logic, yet we don’t question why its taken over our lives.

We’re killing ourselves and our client-base with this old-fashioned charging methodology based on our own sweat and tears. The hourly rate is truly ancient stuff, cooked up in 1919 by a long forgotten Boston lawyer. If anyone can illuminate me on how lawyers charged before this man came along I would be grateful; was it perchance by this newfangled fixed-fee idea, or did they just pluck a figure out of the air and threaten jail if it wasn’t paid?

The hourly rate takes a toll on us personally as the ever-growing hourly figure obliges us to shoulder every burden faced by our client, night and day. Here’s how one conscientious lawyer puts this:

 Mostly, I charge what I do so that I can tell a client….I will be there every step of the way. I will tell you what we should worry about and what we shouldn’t. I’ll keep to myself that your case is causing me to lose sleep because I don’t want to worry you. I manage the entire case for you.  After going through legal issues, sometimes that is like managing your entire LIFE for you.  And I’m happy to do it.  I would literally walk 1,000 miles to fall down at your door… I am that dedicated to my clients.  I went to law school to help people, after all.

Charging hourly punishes you for being efficient. The better you get, the less money you make. So the more experience you have, even if your charge out rate is much higher you will be cheaper and more effective than a trainee solicitor charging one third of your rate. Fact.

The hourly-rate suppresses individual initiative, worker efficiency and good business management.  Fixed fees, monthly packages and commissions are the future my lawyer-friend, that’s how everything we buy works these days, and that’s how how you get the work in and keep your clients happy and coming back for more.

Sorry lawyers, I know you try hard and you’re clever but your business model is plain WRONG.

And the view from our clients: YOU CHARGE HOW MUCH PER HOUR? When I go into a shop, does the can of beans I pick up increase in price by the time I get to the check-out? I want fees that are fixed right from the start, with a nice clear price label. Then you get my business.

Arguments for the hourly rate

The hourly rate is our daily grind: You won’t find lawyers standing about idly on a tea break

These business experts know nothing about lawyers or how they work and charge for services, they’re just most likely peed off because they’ve got a bill from a lawyer which they don’t want to pay.

Lawyers are not making widgets through an automated process or trading on the stock exchange where the sky’s the limit so far as profitability. We charge for our time and experience, that’s all there is to it. It’s a good honest trade with an honest charging system. Commissions? You not heard of CFA’s? Monthly charges? That’s fine for the employment lawyers, but its not a one-size fits all thing.

Our work is often complex and unpredictable, so we charge by the hour because I often don’t know how much work I and my team will need to do at the start of a matter. Yes, I know clients like to know that the costs are predictable and certain before they instruct us, but I’m sorry that is not always possible.

You think I should charge a massive fixed fee for work which requires a few hours of client communication, and some changes here and there to some precedent documents we have already? That’s hardly fair is it? And its most likely in breach of a numerous professional obligations I must follow in respect of client care and costs.

Which is right?

I honestly don’t know which of these arguments is definitely right or wrong, but I think they all valid and worth engaging with when we review our charging structures.

What happens when the first information we give clients on costs is our hourly rate

But the way we inform our clients about our charges needs thought. We don’t have a professional obligation to tell clients our hourly-rate in all circumstances, even if we have one that we use to calculate the fee quote we give to our clients. If one of the first things we say to a client is “my hourly rate is x hundred £ per hour” they may justifiably be frightened off.

We can however give a quote at the start of a matter, then explain how and when this could be revised should there be any unexpected additional costs, obviously updating our clients and obtaining their agreement before the additional costs are incurred.

It’s true that our “product” in many cases is unlike a can of beans – input costs are highly variable and unpredictable. What can start as some initial advice on a matter for a low fee can escalate into something involving half a team of lawyers and worth tens of thousands. Cost estimates can vary multiple times during a matter according to how a client instructs us on how to proceed, and other variables such as what emerges as evidence.

In litigation and family matters fixed fees are much more difficult, and informing clients of our hourly rate is probably essential in my view as this gives the client perspective when they may decide to fight a matter to a final court hearing, or chat to you for a hour on the phone.

As always views from both sides are very welcome – please use the comments box below.

Share this post, like or follow
RSS
Follow by Email
Facebook0
Facebook
Google+
https://www.lawpracticemanager.co.uk/business-management/what-can-be-added-to-the-hourly-rate-debate/
LinkedIn165
Martyn

Ben

I set up Law Practice Manager because I enjoy sharing fresh and original opinions and posts on law management issues. Facebook and Twitter: @LawManager1 LinkedIn group: https://www.linkedin.com/groups/8538343

2 thoughts on “What can be added to the hourly rate debate?

Leave a Reply

Your email address will not be published. Required fields are marked *

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

Close