For as long as most lawyers can remember, their work has revolved around the billable hours system. But as AI is increasingly being incorporated into legal workflows, is this model losing its relevance?
Billable hours are easy to measure and keep track of, which is a key reason why the legal sector has relied on them for so long. But with the integration of AI into more legal work, tasks that previously took hours to complete can now be done in a matter of minutes. Because of this, lawyers can work much more efficiently, achieving far more work in far less time.
But when it comes to hourly billing, this presents a problem: AI makes lawyers work more quickly, meaning they have fewer hours to bill for – and may potentially end up sacrificing revenue in the name of efficiency.
Does this have to be the case? Should a job that previously took a few hours, but now takes a few minutes, be charged like so? This would create huge financial pressures for firms and make it much trickier to turn a profit. So what’s the alternative?
Caroline Woodman, Senior Vice President and Managing Director in Legal Solutions at Epiq, says: “The billable hour has been the industry standard and embedded in law firm culture for decades. We’ve seen repeated efforts to shift towards models where clients are charged based on the value delivered rather than the time spent. These alternatives have gained ground but have not displaced the billable hour.
“AI is adding to the challenge and questioning the logic of time-based billing as it becomes a regular part of legal workflows. The correlation between hours worked and value provided is weakening. We are seeing a serious and sustained move towards value-based billing.”
Clients are increasingly becoming aware of how AI assists lawyers in their work and will inevitably start to question whether the way they are billed reflects the value they’re receiving. But value-based alternatives to the traditional billing model suit both lawyers and their clients by placing the emphasis on output rather than input.
The move away from the billable hours model will not happen overnight. But billing models that focus less on an hourly rate and more on value are receiving increasing uptake. Embracing this change will help to bridge the gap between efficiency and value while keeping clients at the centre of focus and also supporting the legal industry on its digital transformation journey.
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Epiq is a leading legal and compliance services platform integrating people, process, and technology. Through this combination of innovative technology, legal and business expertise, and comprehensive solutions, Epiq drives efficiency in large-scale and increasingly complex tasks. High-performing clients around the world rely on Epiq to streamline the administration of business, settlement administration, legal, and compliance operations to solve immediate challenges and provide scalable ongoing support to transform the enterprise.
