Will AI Mean the Death of the Billable Hour in Legal?

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Printed Feb 20, 2026

With synthetic intelligence, authorized professionals are getting rather more performed in a day. However for legislation companies that invoice primarily by the hour, this will not bode effectively. As attorneys full their work quicker for purchasers, they log fewer billable hours, which implies much less income for the agency.

Resulting from this battle between effectivity and profitability, many have predicted that the usage of AI will imply the tip of hourly billing in authorized. 

In actual fact, for many routine authorized work, hourly billing was by no means an incredible mannequin to start with. It rewards time spent, not worth delivered, and for predictable, repeatable duties, that’s more and more laborious to justify, particularly with at this time’s programs for managing casework. 

Analysis exhibits that the predominance of hourly billing is shifting. Almost half of companies used to invoice solely by the hour, however lately, extra companies have opted to include flat charges into their billing as effectively. This text seems on the issues inherent to hourly billing in authorized, and why, with fast improvements in AI applied sciences, it’s time for companies to embrace various billing fashions. 

The issue with the billable hour in authorized

Hourly billing is lower than splendid for purchasers and is usually extra a matter of comfort for legislation companies. It additionally places the entire cost-associated threat onto purchasers; if a case takes longer than anticipated as a result of unexpected circumstances, the shopper pays for the additional time wanted to deal with problems. For the shopper, each hour a lawyer spends on a case finally ends up being a sunk price, and any overruns solely compound the monetary burden of attaining an final result. 

How hourly billing turned the norm

Initially, hourly billing was designed to advertise equity, effectivity, and shopper satisfaction. It gave purchasers transparency into the work attorneys had been doing on their case, whereas additionally permitting managers to trace how time was allotted inside the agency and higher plan resourcing, accounting, and earnings. 

It was straightforward to manage from a clerical perspective and in addition match with the strict moral necessities that attorneys should work inside, which ultimately solidified hourly billing because the trade norm. 

Why it falls brief for purchasers and companies

Along with taking over the entire threat, there are additional disadvantages for purchasers: 

Lack of price transparency: Even when a lawyer gives an estimate, purchasers sometimes gained’t get any price ensures. Until the lawyer gives common updates, they might not even know the way a lot they’ll be spending till they obtain the ultimate invoice. 
Lack of price incentives for attorneys: Legal professionals are incentivized to spend extra time on a shopper’s case, not much less, after they invoice by the hour. In different phrases, if there’s a greater, quicker, extra environment friendly means of doing the work for a shopper, it’s within the lawyer’s finest curiosity to keep away from it. That is problematic as a result of it finally hinders innovation, even when it might profit purchasers. 

Hourly billing can be inefficient and wasteful for what number of legislation companies function. 

Annually, the Authorized Developments Report benchmarks key enterprise indicators, together with common realization charges amongst legislation companies. Realization charges measure the quantity of billable work that will get billed to purchasers. In 2025, the common realization charge for legislation companies was 88%, that means that 12% of the time a agency places in the direction of billable work by no means really will get billed. 

This highlights an vital hole in enterprise efficiency, and write-downs are sometimes a key concern. Whereas they don’t really depend as an expense, write-downs symbolize a considerable price for legislation companies, actually because an excessive amount of time will get put right into a matter within the first place. 

Whereas many attorneys could also be frightened about spending much less time on their circumstances as a result of AI, many already acknowledge that they spend an excessive amount of time on that work anyway, as evidenced by their write-downs. 

How AI threatens hourly billing income

In line with the Authorized Developments Report, as a lot as 74% of billable work performed by authorized professionals could possibly be automated with AI. That is primarily based on the truth that AI is extremely highly effective in its potential to learn, interpret, cause, and draft content material, and that it will probably deal with a lot of the routine, document-heavy work that may be time-consuming for a lawyer or their workers to tackle.

To present you only a few examples of AI use circumstances in legislation, and what this might appear like in a given workday: Authorized AI options can learn and summarize a deposition, carry out contract evaluation, and determine related case legislation primarily based on a number of shopper notes. For a lot of attorneys and their workers, these actions alone could make up a considerable portion of their day. Having the ability to do that with AI implies that these duties could be accomplished in minutes as a substitute of hours or days.

Working with AI can be getting a lot simpler. As an alternative of requiring detailed prompts that should be typed right into a chat interface, authorized AI options have pre-built workflows for the numerous kinds of work performed in a legislation agency. To research a deposition, for instance, it’s so simple as dragging a file into the proper field. 

It actually is a revolutionary second for legislation companies. In the event you haven’t stored up with the most recent developments and capabilities in authorized AI options, it’s price taking a second to catch up. Quite a bit can change even inside the span of some months. 

Nonetheless, it’s price noting that whereas these applied sciences can tackle a considerable quantity of the work performed in a legislation agency, they don’t change the position of a lawyer or paralegal. No instrument can change the experience and accountability of licensed authorized professionals. As an alternative, AI shifts the main focus of labor from time-consuming prep work to a larger concentrate on technique, verification, and oversight. It additionally frees up time to spend with purchasers, holding them updated, and making them really feel like they’re being taken care of. 

How agency revenues are affected by AI

There are differing opinions on methods to account for the effectivity positive factors with AI, and authorized professionals are responding in numerous methods.

Elevating costs throughout the board
Sarah, a senior paralegal, experiences that her mid-sized leisure and employment agency efficiently raised their charges “throughout the board.” This was justified as a result of the agency payments by way of a month-to-month subscription. AI allows them to ship extra work for purchasers, and the know-how frees the agency proprietor to concentrate on these relationships, making them really feel extra valued.

Contributions get undervalued
Benjamin, an operations supervisor at an employment protection agency, notes a spot the place authorized professionals’ billable impression is undervalued as a result of efficiency targets are nonetheless primarily based on hours, not the worth of the output. He explains that workers can full 10 hours of labor in 10 minutes with AI, but aren’t acknowledged for that worth as a result of low billable hours.

Time financial savings repay in work-life steadiness
Henry, the proprietor of a small enterprise legislation agency, accepts a small discount in private earnings as a trade-off for higher effectivity and work-life steadiness. He makes use of AI to chop three-hour information down to 2 hours, retains his hourly charge the identical, and is prepared to “eat the price of higher effectivity” to keep away from working “completely loopy hours.”

Balancing time financial savings with pricing
Sebastian, a associate at a small actual property agency, advocates for a balanced strategy to profitability and shopper financial savings. His technique is to generate content material with AI, evaluate how lengthy the duty would have taken manually, after which “cut up the financial savings between the shopper and myself so that everyone advantages.”

Supply: Interviews from the 2025 Authorized Developments Report

One factor is evident: Merely charging full value for one thing that doesn’t take practically the identical period of time doubtless isn’t moral. As Ezra, a associate at a basic follow in Indiana, describes, “If you are able to do the identical operate in 1 / 4 of the time with AI, you’ll be able to’t ethically move that on to your shopper.”

As authorized professionals undertake AI extra extensively, they’re extra more likely to alter their pricing indirectly, both by growing costs, lowering them, or introducing new charges for the usage of particular AI companies. 

Moreover, the extra legislation companies use AI, the extra doubtless they’re to enhance their revenues. In complete, amongst companies which have adopted AI extra extensively, 69% have seen revenues improve. 

The argument for flat-fee authorized companies

Whereas hourly charges create uncertainty and introduce the danger of price overruns for purchasers, flat payment billing does the other, reinforcing transparency, belief, and comfort within the following methods: 

Upfront prices: When legislation companies present authorized companies at flat charges, purchasers get the advantage of seeing upfront the entire quantity they will count on to pay. 
Much less stress: If the prices to work a case are constructed right into a flat quantity, purchasers don’t must stress about whether or not a query or dialog with their lawyer will run up the prices on their case. 
Extra comfort: When charges are tracked in opposition to particular duties, it makes it simpler for purchasers to evaluate and perceive what they’re being charged for, which reduces the danger that they’ll increase a dispute. When companies invoice and gather funds electronically, in addition they make it simpler for the shopper to rapidly view their invoice and pay it instantly from their cellphone. 

Flat charges don’t simply have benefits for purchasers; in addition they scale back administrative burdens for legislation companies. Whereas it’s nonetheless a good suggestion for companies to observe how a lot time will get put into circumstances (to raised gauge their pricing), they don’t must stress about reviewing and approving payments in opposition to their time logs earlier than sending invoices to purchasers.  

Better advantages to flat payment billing when utilizing AI

Whereas companies billing by the hour threat shedding income to effectivity positive factors with AI, people who rely extra on flat charges stand to learn. Having the ability to get work performed quicker doesn’t scale back the worth of that service within the eyes of the shopper. For companies that cost a payment primarily based on that worth, and which might be in a position to full extra circumstances in the identical period of time, they’ll be capable to earn much more general. 

Having the ability to move on a few of these price financial savings to purchasers can even make their companies extra reasonably priced and extra aggressive when attracting new purchasers.

When flat charges aren’t splendid

Whereas flat charges work effectively for predictable, repeatable kinds of authorized work, they arrive with larger dangers on the subject of circumstances which might be actually novel, unpredictable, or complicated. A majority of these circumstances carry a better threat of time overruns, which makes them extra appropriate for hourly or hybrid payment preparations to steadiness the pursuits of each the shopper and the agency. 

Influence of AI primarily based on billing mannequin

Standards
Hourly billing with AI
Flat charges with AI

Moral considerations
Potential moral concern, as it’s thought-about unfair to invoice purchasers for the unique period of time when AI has dramatically lowered the precise time spent (e.g., slicing a activity from 4 hours to at least one). That is typically seen as “ethically questionable.”
Extremely moral, as pricing relies on the worth or final result delivered, not the time spent. Effectivity positive factors from AI are implicitly accounted for, and companies can share the financial savings with purchasers.

Incentives
Misaligned. Hourly billing inherently disincentivizes AI adoption and effectivity. Finishing work quicker (with AI) means fewer billable hours and fewer income, incentivizing attorneys to spend extra time, not much less.
Extremely aligned. Effectivity positive factors from AI are immediately rewarded. Quicker completion of labor (with AI) on a fixed-fee matter will increase the agency’s revenue margin and frees up capability to tackle extra purchasers.

Profitability
Danger of income shortfalls and write-downs. The effectivity of AI immediately reduces the variety of billable hours, pressuring income. Write-downs are sometimes essential to make the invoice palatable to the shopper, resulting in misplaced productiveness and income.
Potential for important income will increase. Companies can leverage AI-driven effectivity to extend general shopper quantity and income. 

The way to arrange flat charges at your legislation agency

To maneuver from hourly billing to setting flat charges for his or her companies, companies ought to purpose to create a “menu” of companies they provide. These charges ought to replicate the time spent and the worth these companies present. To do that, companies ought to take a number of steps:  

Take a list of the kinds of issues that the agency handles regularly. This could embody a survey of various follow areas that accounts for the numerous totally different avenues and permutations a matter would possibly take. 
Audit the worth of every case kind and assign a value that covers 80–90% of your circumstances for that class, plus some padding to mitigate threat and make sure the work stays worthwhile. The aim is to create transparency and assurance for you and the shopper. Sure, there could also be circumstances that take longer and drive you to eat a number of the price, however you additionally profit when the shopper sees you go above and past for them. And, with time and expertise, you’ll hopefully be capable to spot these points forward of time. You’ll even have circumstances that take a lot much less time to finish (however which might be nonetheless simply as worthwhile to the shopper), which can assist offset the circumstances that take longer. 
Be aware the kinds of work which have a excessive diploma of variability. These are the kinds of circumstances the place it could make sense to maintain an hourly charge as a result of unpredictability. Nonetheless, it’s price seeing if that is an space of legislation that may be damaged into totally different subcategories and priced accordingly. Some kinds of issues could not have a single flat payment for your entire case, however a number of costs for particular person phases or developments that may be bought as unbundled companies. 

The work of setting flat charges for all of the several types of circumstances your agency handles can appear daunting, particularly on the scale of a bigger follow working in lots of areas of legislation. However even in a small legislation agency with a slender focus, that is the place a follow administration system can assist. 

With a platform like Clio Handle, you’ll be capable to run experiences primarily based on detailed categorizations to raised perceive what quantity of your caseload falls inside a specific kind of authorized downside, how a lot time will get spent on every kind of concern, and the entire worth of billings and bills for every space of legislation. With these insights, you’ll be capable to precisely value your agency’s companies and transition confidently from hourly to flat charges when it is smart. 

For companies seeking to formalize and standardize these pricing fashions throughout the group, a instrument like AltFee can assist translate efficiency knowledge into constant payment buildings and client-facing proposals. Learn how Temple Legislation transitioned to a flat-fee pricing mannequin and the way Clio and AltFee supported the shift.

Rising capability for circumstances and purchasers

If companies spend much less time on their purchasers’ circumstances, there’s a possibility for them to work with extra purchasers general. 

Analysis exhibits that the demand for authorized companies far outweighs the availability. In line with the World Justice Mission, 77% of authorized issues don’t get skilled authorized help. In different phrases, regardless of being a aggressive marketplace for purchasers, there’s additionally the argument that legislation companies can do extra to service those that are unable to search out the help they want, whether or not it’s as a result of perceived problem find a lawyer, the complexity in understanding their downside, or the uncertainty of their potential to afford help. 

To enhance shopper quantity, legislation companies ought to market their companies extra extensively, particularly on-line. Shoppers need to see a powerful status and demonstrated expertise dealing with comparable authorized points. It’s vital to maintain enterprise profiles updated, and to focus on as many optimistic opinions as doable. 

Companies must also be prepared to reply to purchasers after they attain out. In line with latest analysis on agency responsiveness, solely 52% of companies answered cellphone calls, and simply 33% responded to emails. For these companies, the perfect recommendation for getting new purchasers is to easily decide up the cellphone and reply their emails. 

That is the place a devoted consumption answer can assist maintain monitor of all those that attain out to the agency, with the additional benefit of on-line bookings, automated follow-ups, and the power to streamline the consumption course of. Software program like Clio Develop additionally lets you arrange and handle Google’s Native Providers Advert campaigns and to get detailed insights into what advertising initiatives are driving probably the most enterprise. 

Once more, simply because a agency isn’t charging by the hour doesn’t imply it ought to be incomes much less. In actual fact, transferring to flat charges ought to imply working with extra purchasers and incomes extra for it. 

Adapting to the way forward for authorized follow with AI

Hourly billing has lengthy been a mainstay in how legislation companies invoice for his or her time. It’s unlikely that it’s going to ever totally “die” or fade into obsolescence. For a lot of complicated circumstances, it gives the perfect, most clear means for companies to invoice their purchasers. 

However for extra routine kinds of authorized work, flat payment billing gives each companies and purchasers a greater means to reap the benefits of the advantages of AI in authorized work. AI is an extremely highly effective know-how, and it’s having a profound impression on the authorized trade. The earlier that attorneys adapt to the alternatives offered by AI, the earlier they’ll be capable to use them to learn their enterprise. 

Whereas hourly billing could by no means fully disappear, legislation companies ought to be ready to place within the work to cost their companies with extra transparency and value assurance. This can assist earn extra belief with purchasers, whereas additionally setting companies up for larger success in the long run.