Does Hourly Billing Make Sense?
Posted: January 28th, 2008
By: Zach Heller
Category: Career Corner, Law Firms, Opinion Corner

I recently read an opinion piece in the New York Law Journal about the practice of hourly billing.  I have always contended that there are major flaws in industries that bill clients by the hour as opposed to flat fee billing.  And this article, written by Steven G. Nachimson, discusses some of the major issues that need to be looked at when considering a change from this billing method.

First off, the major flaw of this system is that “it promotes inefficiency”.  In a system where the longer something takes, the more you get paid, there is no motivation to “finish” anything.  In essence, fees are not truly based on results or skill of the person.  Sure, someone who has more experience and is more successful will get more clients and therefore get the pay that they deserve, but an inefficient person can make more money by taking more time to complete certain tasks.

Law is just one example of where this “problem” exists.  A therapist, for example, has no motivation to get a client to stop coming back for more therapy.  In my opinion, a therapist should charge a flat fee, payable the day that therapy is no longer needed.  I think we would see a lot less people in therapy for long periods of time that way.

And in the law, it is the same problem.  The issue comes down to the motivation of the professional to get a job done.  A flat fee system may not work either but I think the process needs a second look.  In the article, Mr. Nachimson suggested that fixed fees make it easier for clients to see the value in legal representation, which is extremely important.  This is an issue that should be considered by many in the legal community.

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Comments
I don\'t know if it makes sense to charge a flat fee because so much of what law firms charge is based on dealing with things as they arise. Maybe a more structured fee could be set up but it would take a long time to plan out one that works.
Comment By: Darrel - January 29, 2008

My law firm does use a flat rate for certain business clients to start and adds fees based on "extra" work that is done. I think that is what this article was about.
Comment By: Anonymous - January 29, 2008