In the legal world, attorneys typically charge a set amount for each hour of time they work on a case. This billing method is commonly known as the “billable hour.” However, there’s a growing trend among attorneys to use flat fees. They are ideal for cases where the work involved is uncomplicated, predictable, and routine. Let’s discuss the difference between hourly billing and flat fee billing and which fee structure is best for your matter.
Hourly Billing
With hourly billing, an attorney charges a set hourly rate for the work performed on a case, transaction, or legal review. The client is to pay a retainer deposit at the start of the work. This guarantees that they have the financial resources to engage the lawyer and fund the case. The retainer is either an amount sufficient to complete the first phase of the representation, or a different percentage based upon firm policies.
A retainer is an advance on payment for the lawyer’s services and is earned by the attorney or used for legal expenses. As the case progresses, the client can ask for and should be provided with an accounting that details how the retainer is being used for legal representation. If the retainer balance runs low during the course of the case, the attorney will ask the client to deposit more into the account to proceed with the case.
Flat Fee Billing
With flat-fee billing, the client pays a specified amount for a certain type of case, transaction, legal review, or document. That is the cost for the attorney’s representation for that specific scope of work, no matter the length of the dispute or if complications arise (provided it does not change into another type of work). For example, many attorneys charge a flat fee for a simple (uncontested) divorce or a personal bankruptcy. With a flat fee arrangement, it does not matter how long the work takes, the fee remains the same.
Which Fee Structure is Best for You?
The fee structure you choose depends on the type of legal work and other circumstances. However, flat fees are appropriate where the work involved is usually uncomplicated, predictable, and routine.
Benefits of Hourly Billing
The most significant benefit of hourly billing is flexibility. When the length of a matter is unknown, it can be difficult to estimate the workload. An hourly fee lets both the attorney and the client proceed on the basis of recurring need, allowing for increases in workload when required.
Benefits of Flat Fee Billing
With a flat fee, the focus is on value and predictability rather than billable hours. It encourages the attorney to work efficiently to add as much value to the client’s matter as possible. Financial expectations are managed, and stress is reduced as clients know what to expect and can budget accordingly. A flat fee arrangement can also help align goals in the attorney-client relationship.
Takeaway
A flat fee structure can be advantageous for straightforward work, while hourly billing may be more appropriate for complex matters where the length of the representation is unknown. At Danilson Law, we focus on offering predictable, fair, flat fee services to our clients whenever possible.
