Law firm fees have become the focus of much debate in recent times. It has been argued by some that current year-on-year increases in charge-out rates have now become unsustainable. Some even believe that excessive fees could drive away business from the UK to alternative legal jurisdictions. On top of this, clients are now becoming increasingly price sensitive, with tougher economic conditions leading to a greater focus on the value that law firms create.
The key complaint is that the current dominant standard – hourly billing – is an ineffective and crude tool to measure the value created for the client. Hourly billing and associated bonus schemes create incentives that raise serious ethical issues. In light of this, there have been calls for greater use of alternative pricing models that better align incentives between the firm and the client, as well as more effectively reflect the value that is created. Law firms have started to make some progress by experimenting with fixed- and capped-fee structures.
