The impending demise of the billable hour as a basis for charging for professional services and in particular, for legal services, has been anticipated in various media for some time. In support of this argument it is usually stated (often as ‘fact’) that this method of billing encourages inefficiency i.e. the longer it takes to do a job the greater the billable hours and the more lawyers can and will bill.
I have never believed it is as cut and dried as this.
While there are undoubtedly issues with time-based billing, it is a system which has worked reasonably well for lawyers and for clients, both of whom are good at managing the limitations so as to achieve a fair outcome.
Survey of in-house counsel:
So it was interesting to read of the results of the inaugural Compass Corporate Counsel Annual Survey 2011 (pdf) conducted by Mallesons, and reported on by Alex Boxsell (pdf with annotations!) in the AFR (26 August 2011) which indicated that:
- a majority of corporate counsel still use billable hours as a basis for charging – there was a broad preference for this;
- there may be criticisms and imperfections but it is still the core and staple system which has worked reasonably well for a considerable time;
- half the respondents stated that 90% of the work they have done for them is done on the basis of billable hours;