Report: Calling time on the billable hour in the UK

LexisNexis UK has released a new report that looks at why almost half of all external legal spend is now taking place through alternative fee arrangements such as flat or fixed fees, a major increase since pre-pandemic times.

The billable hour has long been criticised for encouraging behaviour that runs counter to a client’s best interest. It can also stifle innovation, particularly the adoption of technology that speeds up tasks. In “Calling time on the billable hour,” Stephen Denyer, director of strategic relationships at The Law Society of England and Wales, says: “One of the basic aims of law tech is to speed up tasks, which doesn’t really help your profitability if you’re still sticking to billable hours, so firms are still coming to terms with how to feed in the law tech element.”

Using in-depth interviews with senior partners at top law firms and general counsel at leading businesses, the report digs into the pros and cons of the billable hour model, the challenges of pricing matters when using alternative fee structures, and how these trends are likely to develop in the future.

“You’ve got to kick the habit of the timesheet as well as the billable hour, because as long as you keep telling people that more hours is a good thing, you’re going to get more hours. That’s not good for the client, the lawyer or the firm if they are trying to figure out how to add more value more efficiently,” said Alex Hamilton, founder and CEO of Radiant Law, which works entirely on a flat fee basis.

Better use of data will be critical for disrupting this billable hour model, observes Isabel Parker, legal management consulting partner at Deloitte Legal and executive director of the Digital Legal Exchange. She says in the report: “Law firms bill their time in six-minute increments, so they’re sitting on a lot of time recording data, so if that data can be mined and used for insight about what’s really involved in delivering a matter, law firms would have much more confidence in the way they price.”

Read the report in full here: