Time To Do Away With Time Costs

Boon Gan Ng

Senior Legal Associate at VanillaLaw LLC

I want to qualify this article by stating that I have never rendered a time cost bill in my entire life. My firm works for a fixed fee in exchange for a well defined scope of work, and I have never seen a client ask to switch to time-cost billing. Even though time cost billing is still a prevalent practice in the legal industry, none of my peers seriously defend it, and we have to acknowledge the problems that it creates for everyone involved.

The customer

1. You have no idea how much you're going to spend in the end until you get your bill. This makes planning and budgeting for legal costs difficult, especially if you run a business with a recurring need for legal services.

2. Some law firms offer to reduce your costs by getting junior lawyers or non-lawyers to do part of the work. But you have no way of verifying who actually did the work, even if they presented their timesheets to you.

3. Do you choose someone who has a higher billing rate who might be able to get the job done faster, or a younger lawyer with a lower rate who hopefully will produce a smaller bill at the end? (But what does this have to do with the quality of service you receive?)

The firm

1. Customers will bargain with you and ask for discounts after you present the bill. You come under constant financial pressure even though you thought you gave the customer advance notice of your rates.

2. If you and the customer can't reach a consensus on the appropriate amount to pay, you have to apply for taxation. You have to spend more resources to get what is owed to you, and even then there's no guarantee that you'll get everything you want.

3. Everyone has a slightly different idea of what a reasonable rate is. Even if you inform the customer of your hourly rate beforehand, you still can be accused of over-charging. Unless you are the sort who thinks any publicity is good publicity, your reputation will take a hit.

The associate

1. You are only as good as the hours which you an record as billable hours. Anything else which is not billable might be considered wasted, depending on how your firm weighs other activities such as business development.

2. To add insult to injury, you have to spend time recording the time you spent which is even less billable time spent. Granted, this activity can be alleviated by practice management software, but you rather spend time on more productive pursuits.

3. You feel pressured on both sides - the firm which has an interest in maximising profits, and the client who has an interest in a lower bill or financial certainty.

Time cost billing should go the way of the dinosaur, given how it has no relation to the value which law firms create for customers. Is our value the time we spend with or for customers? Some people take the view that only what can be measured can be valued, but if you have an instinctive or reflexive dislike for financial uncertainty, then deep down you already know that time cost billing is not for you. Lawyers need to take a hard look at ourselves and ask if time cost billing serves everyone's interests.