What’s the Best Billing Measurement: 1/10 Hour, 1/4 Hour, or Non-Hourly?
Every billing approach, be it fixed-fee or hourly, has pros and cons to keep in mind.
An increasing variety of lawyers are returning to an old-fashioned approach to billing: setting fees based upon the overall scope of work or the value of the task, rather than a strict hours = dollars approach. Many non-contingency lawyers have always worked that way, such as those creating estate plans or drafting a real estate or premarital contract. I remember seeing a bill sent to a friend of mine many years ago that simply said: estate planning services, $25,000. But even in sub-fields that have traditionally worked on an hourly basis, such as divorces or business transactions, many lawyers are finding that a fixed fee works best for them—and for their clients. There is no surprise about the bill, there is no anxiety (for the client) about the cost of a longer meeting or multiple revisions of a document, and there’s a sense of fairness in this approach.
I’ve always shied away from fixed fees, feeling that it rewards the inefficient at the cost of the efficient. For example, if my client has spent time with his fiancé and thought through all the nuances of the premarital agreement, and is able to clearly articulate what he wants—and then sticks with that approach as the agreement is drafted—that client will take up less of my time and so will get a lower bill. It just doesn’t seem right that I should charge the same amount to a client who asks for repeated meetings, requires more time talking through what they want, and then changes their mind repeatedly over small issues. But if a fixed fee works for you and your client, by all means give it a try.
Even if you are billing on a flat fee basis, you should be keeping track of your time. You will want to compare what you are charging as a flat fee to an hourly rate fee, so you know you are charging your clients the right amount. You also will want to be able to evaluate how efficient you are, and which tasks take up the bulk of your time. And, if a client ever challenges the reasonableness of your flat fee, you will want to be able to document your time to support your bill.
Thus, whether you are charging by the hour or not, it’s essential that you keep track of your time. Some lawyers do it on the 1/10 hour basis, some on the quarter hour basis, and it can make a rather significant difference which approach you take. The upside of the 1/10 hour system is that your time is going to be documented in finer detail, and you can show to your client with great precision how long a particular task has taken. On the other hand, monitoring your time to this level of detail is a serious burden, especially if you are working on multiple matters in a single day. I’m pretty good at estimating whether a call or meeting took 15 or 30 minutes, but I am not sure I can keep track in six-minute intervals over the course of a day if I’m working on ten different files.
By contrast, the quarter-hour increment allows for a more manageable time monitoring process. I try to note the name of the matter on my paper time sheets whenever I’m first working on a matter in a day, and then enter the amount of time spent on the matter as soon as I’m moving on to something else. If I’ve gotten distracted or simply been too busy to note the amount of time, I will benefit by having listed the case I’m working on at the outset, so I can enter the amount of time at the end of the day. Using a quarter-hour measure greatly eases the task of recording accurate time, even when the entry is made several hours after the work was done.
On the downside, it can result in some inflated charges, if you apply the quarter-hour measure to every little task. This can create serious client resentment, for good reason. I address this problem by not charging for short tasks—for example, a simple email or very short phone call—and I tell my clients about this practice. For most clients I use the five-minute threshold as to what justifies a billing entry. I also bulk up all the multiple short tasks that take place in a single day, so that three short calls or emails will only result in one quarter-hour being billed. I generally round down whenever the time is less than half of the quarter-hour segments, and I don’t charge to receive emails where no work or reply required. Note: if your bills are paid by a government agency or insurance company, they will probably require the 1/10 measure of your time.
Anticipating this issue, when possible I make a note on my time sheet of any case which involves a short non-billed email or call that day, so I can mention to the client later on, when I send out a bill, that I haven’t billed for numerous short emails or calls, which greatly reduces any concerns about the size of my bills. Most of my clients are personally responsible for their fees, and they usually participate in many of the activities listed on my bill. Thus, they will know very quickly if I’m overstating the length of a meeting or phone call, or even the amount of time it’s taken me to draft an email. If they ask me a question and I respond within fifteen minutes, it wouldn’t look good if I listed thirty minutes for the reply to the email.
Frederick Hertz, an attorney and mediator based in Oakland, has managed his practice for more than 25 years.
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