Fixed fees vs. hourly billing in the legal sector.

27th January 2022

Traditionally in the legal sector, lawyers charge clients by the hour.

However, the legal sector is transforming, and new pricing alternatives are emerging. A big reason for this is that business owners are pushing for greater certainty and transparency with legal fees, so they know what their money is getting them and can budget accordingly.

So, what are some of the advantages and disadvantages of fixed fees vs. hourly billing in the legal sector? Read on to find out.

How does hourly billing work?

Hourly billing for legal work is when the lawyer charges the client for every hour of work spent. Time is charged in 6-minute intervals, which means that if you speak to a lawyer for 2 minutes, you still get charged for the full 6 minutes. This billing model is hundreds of years old, inflexible and is not properly suited to most client needs. This can include phone calls, waiting to be seen at court and even travel time to court. While your lawyer must give you an upfront estimate of costs, this is not a set quote. So, when the legal matter is completed, clients can often end up getting charged more than they anticipated. 

The pros and cons of hourly billing

For businesses familiar with hourly billing, it can be a simple way to ensure the work gets done. With added flexibility for a workload increasing or decreasing, some clients may prefer this payment model, particularly if they’re not on a tight budget. 

A drawback of hourly billing is that it’s been known to incentivise lawyers to aim to maximise time spent on tasks to make more money. This inefficiency can lead to unnecessary expenses for the client. What’s more, hourly billing makes it harder to budget for expenses, and too often businesses end up spending more than they expected. By shifting the focus from financial targets to the value provided to the client, hourly billing at law firms is packed with benefits for the client. 

At Lakis & Knight, we’ve seen and heard of far too many cases of people who have felt ripped off and overcharged for legal services.

Hourly billing and pressure at other firms to maximise billable hours means that the client often pays the price. Our competitor firms are increasingly pressuring their lawyers to up their billable hours, which means lawyers no longer have time to sit down and communicate with their clients about how they’re going to proceed, or the fees involved. Their lawyers only focus on billable work and the important work of getting to know the people behind the business – what really drives them – falls by the wayside.

How do fixed fees work?

A fixed fee model at a law firm involves agreeing on a set price for specific legal services. Fixed fee is often used with work that’s clearly defined and follows a standard process. The client is provided with a quote upfront for works, so they know what they’re getting for their money and aren’t in for any nasty surprises. 

The pros and cons of fixed fees

With fixed fees, the focus is on the value you provide to clients, rather than billable hours. Lawyers are encouraged to be as efficient as possible and focus on adding value to the client. For business owners, fixed fees can help you make better, more informed decisions thanks to cost certainty.

Lakis & Knight offer fixed fees to our clients, as we know how much better it works for small to medium businesses. We strongly believe that client-lawyer relationships are built on trust. Our clients know that they’ve always got access to information and reliable counsel, without having to worry about unexpected bills.

The only real downside of fixed fees is that the idea of paying a fee upfront may seem daunting. While it may feel lower risk to pay for work by the hour, this is far from the reality. Fixed fees give you certainty, allowing you to work with your lawyer within set parameters. 

If you’re looking for certainty with an experienced law firm that puts you and your business first, get in contact with us today for a free consultation.