Understanding Legal Billing: Choosing the Right Model for Your Law Practice

Many attorneys put in long workweeks to tackle their caseload: small and midsize firm attorneys usually work 42-54 hours a week and lawyers at bigger firms may put in upwards of 65. 

The billable hour has long been the most popular way for lawyers to bill for their work, but there are a few other notable options worth exploring to make things easier for you and your clients. A shift towards value-based billing using flat fee arrangements or subscription models, for example, could help you earn more. Check out the four most common billing models to help you make your decision about what's best for you. 

The Billable Hour 

The billable hour has been the dominant model for legal billing for the last 100+ years, and currently comprises around 85% of the legal market. The default for many attorneys and firms involves breaking down tasks into 6-minute chunks and billing clients according to how long each task takes. Attorneys may be required to hit certain quotas of billable hours per week, especially at bigger firms, but this model is not the right fit for every case or every firm. 

Pros of Billing Per Hour

Here are the top advantages of billing by the hour: 

• You get paid for all the work you do for a client, whether it's answering a quick email or spending substantial time in trial prep

• If you manage your schedule well, billable hours can translate to more consistent revenue each week/month 

• If you underestimate the complexity of a case, billing per hour still ensures you get paid 

• Many clients are familiar with the billable hour concept 

• You can take your time on each task, ensuring that you give it proper attention 

Cons of Billing Per Hour 

Here are some of the downsides of the billable hour: 

• Clients may feel uneasy about how long certain tasks may take you, worrying that they'll get a "surprise bill" or that you'll work through a retainer much more quickly than they expected

• It can be very tedious to break down your entire day into 6-minute blocks with manual billing hour tracking (use software instead.) 

• The billable hour makes every interaction with and task done by an attorney feel transactional in nature 

• Lawyers may feel pressure to maximize their hours, increasing the risk of burnout 

As AI tools get more powerful, the industry is increasingly questioning whether it makes sense for lawyers to bill their clients based on time spent. After all, as you adopt AI more and more in your practice, you'll get more efficient and complete rote tasks more quickly – and you shouldn't be punished for making those efforts. This is why some lawyers may want to consider alternatives like flat fees or subscription pricing. 

Flat Fee Billing 

Flat fee billing is a simple concept. In this model, you give a client an all-in cost for their case, project or transaction. It can work well if you know how long it will take you and the complexity level of the case before getting into the weeds. 

Certain practice areas may be a better fit for flat fee billing, including estate planning, criminal defense, business law formations and dissolutions, probate cases, and bankruptcy. 

Pros of Flat Fee Billing  

The benefits of flat fee billing include: 

• Cost clarity for clients, which can reduce billing disputes

• If you use structured payment plans or upfront payments, this can improve your cash flow 

• 71% of clients prefer to pay flat fees, according to Clio research 

• Lawyers are incentivized  to implement new processes and tools – like adoption of AI tools – that speed up their work 

• Clients may feel more comfortable reaching out to you for questions or updates without worrying they’ll be billed for every call or email

Cons of Flat Fee Billing 

The disadvantages of flat fee billing include: 

• There is a risk of underpricing work when taking on cases, forcing attorneys to pick up the extra work without being paid for it 

• Setting flat fee pricing requires both experience and the ability to review cases appropriately 

• Some clients could abuse their access to you, creating additional work you didn't expect at the outset 

• Unpredictable cases can be very challenging to price upfront (such as a case you expect to settle but winds up going to trial) 

Contingency Fee 

Contingency fee arrangements involve lawyers receiving a set percentage of a successful case outcome. Lawyers determine this percentage upfront. This model is most popular with personal injury, product liability, medical malpractice, and workers' compensation practice areas, where rates are often 30-40% of the recovery. 

Pros of Contingency Fee Billing 

The biggest advantages to contingency fee billing include:

• Better access to justice for clients who cannot afford flat fees or hourly rates 

• In certain cases — especially those with large damages – a contingency fee arrangement may lead to a higher overall payout than hourly or flat fee billing 

• Attorneys and clients are focused on the same goal: winning the case and receiving the highest possible settlement 

Cons of Contingency Fee Billing 

The least appealing aspects of contingency fee billing include: 

• This model may not be appropriate for all case types, such as family or criminal law 

• Some jurisdictions limit when contingency fees can be used 

• Lawyers must take on the upfront costs of any court fees, investigation costs, or expert witness payments at the beginning of the case 

• Cases may take years to resolve

• If the case is lost, the lawyer may not be paid for their services 

• Deciding which cases to take on a contingency fee basis requires experience and a tolerance for risk

Subscription Model 

In recent years, some lawyers have turned to a subscription model, which involves a set monthly or annual amount charged to the client for set tasks or a set of hours. This can work very well for certain practice areas, such as business attorneys who do a lot of contract reviews, formations, or provide ongoing support. 

Pros of Subscription-Based Billing 

The upsides of subscription-based billing for law firms include: 

• Recurring and predictable revenue 

• Cost clarity for clients 

• Improves retention by focusing on ongoing relationships 

• Encourages efficient workflows and tools 

• It can help law firms stand out, as this model is not as common with law firms today 

Cons of Subscription-Based Billing 

Some of the challenges with adopting a subscription model include: 

• It can be challenging to price subscription services accurately since you need to know the typical time spent on various tasks

• It can be difficult to determine which items are within the scope of the subscription price, which can lead to billing disputes 

• Some clients may require additional attention and time beyond what you expect

• This model doesn't work well for all practice areas or complex legal needs 

Final Thoughts 

Deciding on the right legal billing structure may be difficult. Thinking through client interests, your own capabilities, and your personal working style can help you determine which model or set of models is right for you. For example, within family law, you might charge hourly for complicated divorces but a flat fee for mediation services. 

Paying attention to how you charge clients can help your law firm become more efficient and profitable, so it's worth revisiting your options over time, too. 

Need help tracking your time on legal cases? PointOne offers automated timekeeping so you can focus on what you do best: serving your clients.