Why do lawyers charge on an hourly basis?

There is a pretty interesting post on the Legal Ease blog about fixed fees.  At first the post dispels certain myths about setting fixed fees (one myth is that it is not possible to cater for variables down the road – quite frankly this is something which has perplexed me when quoting fixed fees) and emphaises the importance of the fixed fees being value-based.  The author, Allison Shields, then takes a look at the rationale behind hourly fees which hasn’t really been discussed in the posts I have read on this topic.  Her analysis is pretty interesting:

Much of the reason lawyers still charge by the hour is because they don’t like change, and because billing in any other way requires a lot more thinking and a lot more work up front. It requires more of a conversation with clients about their expectations than most lawyers are used to.

Often lawyers take on a case without fully investigating or exploring not only the facts surrounding the matter, but the client’s specific expectations and values. One advantage of changing the pricing structure is that these longer and more detailed conversations will likely help lawyers pre-qualify clients better, alert them to potential problems earlier, and help them weed out ‘nightmare’ clients before they become a headache.

When I consider why I have charged an hourly rate for some of my work I realise that no-one has ever made a case for the hourly fee except to say that it more accurately reflects the time spent on a given matter and, in the process, assuming the inherent value in that work.  That assumption is part of the problem.  If clients saw the clear value in being charged on an hourly basis then there would probably be no need to have a discussion about the desirability of hourly fees.  When clients consider the value in an hourly fee I think it is fair to say that those clients see the lawyers benefiting disproportionately from that fee structure.

If a lawyer could make out a good case for a fee based on the value the lawyer adds by virtue of his/her expertise, experience or some other factor then I believe clients will happily agree to the fee structure, whether it is hourly or fixed.  Unfortunately for hourly fee advocates, I am not so sure that there is an overwhelming benefit to clients using an hourly fee as opposed to a fixed fee which at least is certain and can be planned for.  Hourly fees are indeterminate and this is where the so-called value proposition starts to break down.

Tags: hourly fee, fixed fee, value, fee structures