Follow Us

Law.com Subscribers SAVE 30%

Call 855-808-4530 or email GroupSales@alm.com to receive your discount on a new subscription.

Lawyer Rates and Arrangements Law Firm Associates Law Firm Financials Law Firm Management Law Firm Partners Law Firm Profitability

Read This Before You Set Your 2018 Billing Rates

Setting the next year's billing rates follows a simple formula at most firms: last year's rate plus a common percentage increase across all lawyer cohorts. A more disaggregated approach is needed -- firms should set higher percentage increases for senior lawyers and lower increases for junior lawyers.

X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

Setting the next year’s billing rates follows a simple formula at most firms: last year’s rate plus a common percentage increase across all lawyer cohorts. A more disaggregated approach is needed. Specifically, firms should set higher percentage increases for senior lawyers and lower increases for junior lawyers. Why? Because, over the next 10 years, hours leverage (i.e., the number of associate hours per partner hour) at elite law firms will decline as more of the lower value-added work is handled not by junior lawyers but by enhanced technologies, in-house counsel, and alternative service providers. To maintain profitability, the margin that was earned on the displaced junior lawyer time has to be recouped through higher margins on senior lawyer time. Failure to increase senior billing rates differentially, and thus to rebalance the source of margin from junior to senior lawyer time, will result in a calamitous decline in profitability. It can be avoided if firms start now to gradually change their billing rate structures.

Read These Next