Calling time on the billable hour
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The billable hour has persisted for decades as the default way for law firms to charge clients and measure lawyer performance. Yet the billing model has attracted criticism for encouraging inefficiency and creating the wrong incentives for lawyers. As a result, more and more work is taking place through alternative billing methods.
In this report, we speak to law firms, lawyers and their clients to discuss the pros and cons of the billable hour model, the challenges of pricing matters when using alternative billing structures – and how these trends are likely to develop in the future.
Is the clock ticking on the billable hour?
From fixed fees to a range of emerging alternatives, clients have more choice than ever in how they pay for legal services

For decades, the billable hour has been the default way that law firms charge clients and measure lawyer performance. But while buyers of legal services are increasingly calling for alternatives like fixed fees, law firms had been slow to respond...until recently.
“The billable hour has been a foundational aspect of the way professional services firms have structured themselves for such a long period of time that any pivot away from that is naturally going to take time,” said Georgia Dawson, senior partner at global law firm Freshfields Bruckhaus Deringer, the UK’s sixth-largest firm by revenue. “That said, over the last 10 years there’s definitely been more of a pivot towards alternative fee arrangements and other structures, where clients are looking for more certainty of cost.”
The number of law firms offering alternative fee arrangements has risen drastically since the pandemic. According to a 2021 survey of law firms with 100 or more fee-earners by tech firm BigHand, 43% of UK law firms said they are offering alternative fees like fixed or capped fees to clients (up 28% from 2020). This roughly aligns with findings from The Lawyer’s most recent In-house Legal Sentiment Survey. Having interviewed 259 general counsel and in-house lawyers, the survey found alternative fee arrangements were more commonly used than a specific hourly rate (46% versus 40% respectively). Alternative billing methods can include flat fees that are agreed for a project in advance, contingency fees that are dependent on the outcome of a case, and capped fees, where costs can’t go above a certain level.
Flat-fees were the most popular, a Bloomberg survey showed, followed by flat fees per matter, volume discounts and blended rates. Some 85% of law firms said their use of alternative billing methods is driven by client demand, with 81% of in-house teams saying they use alternative fees to reduce costs. This compares with just 18% of law firms that use them to reduce their own costs, according to Bloomberg. This creates a potential tension between firms and clients when they move away from hourly rates.
Find out how AI is already altering pricing structures
Alan Guy is managing director of underwriting and value optimisation at top 200 US law firm Kobre & Kim and negotiates alternative fee arrangements on litigation matters. He said law firms typically see flat or fixed fees as a way to do as well or better than hourly rates, though clients are often focused on getting the same services for less money. The productive conversations centre on risk and value, rather than price, he noted.
“For a client, they may think it’s worth $100,000 or $1 million to have a problem solved and they are happy to pay that, even if it worked out more expensive than paying by the hour.”
Some lawyers work entirely on a flat-fee basis. For example, commercial contracts firm Radiant Law was launched in 2011 on a flat fee model, intending to fix the incentive problem inherent in law firms that bill by the hour.
“There is a massive value gap,” said Alex Hamilton, the firm’s founder and CEO. “Legal services are way too expensive, and if you have worked in the sausage factory like I have as a partner at a big law firm, there are a huge amount of activities that are not really adding value that are being charged to clients at huge rates.”
By working on a flat-fee basis, Radiant’s lawyers are incentivised to work faster, delivering better value for clients.
However, not all work is suited to alternative billing arrangements. Firms generally agree to flat fees only in more predictable matters; otherwise, they risk committing to a fee that could underestimate the work involved.
“If you’re a big firm doing debt capital markets transactions, you’re probably doing thousands of those and so you’ve got a very good idea of what your fixed charge ought to be,” said Stephen Denyer, director of strategic relationships at The Law Society of England and Wales, a professional association for solicitors. “On the other hand, if you’ve got a major, multi-party M&A transaction or a restructuring or a bit of litigation that could go in lots of different directions, you’ve got no realistic way of knowing what elements there are going to be and therefore what you ought to charge for them.”
Billable hours are also used by certain courts to assess costs and ensure the side that picks up the tab pays a reasonable rate.
“If you use an alternative fee arrangement and there is a costs award in favour of one or other party, the English courts' costs assessment process still evaluates the fairness of that fee by reference to a billable hours metric,” said Dawson. “So there will be some areas where change will naturally be slower because the incentives aren’t there to drive change.”
The billable hour is also sometimes the easiest way to pay for urgent legal advice or to address a matter that must be quickly resolved.
“In some ways the billable hour is the smallest possible fixed fee and so often that’s what people revert back to just because it’s simple,” said Guy. “A lot of the time if you’ve started reaching for the lawyers, it’s usually because you have a problem that’s got some time sensitivity to it.”