In recent years, myriad practitioners have opined that time-based billing “is still an important option”, and one former BigLaw head told this brand in 2018 that “clients typically don’t want” movement away from billables, for reason that the model allows them to retain more control.

On the other hand, heads of legal told this brand earlier this year that it is “natural to expect” that costs for legal services will ultimately reflect the efficiencies inspired by AI, and research shows that alternative pricing arrangements, such as fixed fees, are increasingly being offered to clients across Australia.

Some lawyers have gone further, observing that the rise of GenAI means that billables will “inevitably decline”, and one report from late last year even suggesting that the billable hour may be incompatible with GenAI innovation.

The billable hour has long been a cornerstone of legal services, and undoubtedly still offers multiple benefits, including but not limited to simplicity and familiarity for practitioners and clients alike, and for the protection it offers if the volume of work required on a matter is underestimated.

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Why, how and why do billables remain essential for certain practices?

Why billables

Gravamen founder and principal, James d’Apice, explained that he has learnt to judge his effectiveness via the billable hour, and that of those around him.

“The future projections of my firm’s performance are based on the billable hour, just as the reports on my firm’s past performance are derived from it. I communicate with clients, and provide them with estimates, based on the billable hour. I expect them to judge my and my firm’s performance based on the billable hour,” he said.

“The billable hour is the foundational unit of the legal work Gravamen does.”

Caralee Fontenele, the director of Scalable Law and Collective Family Law, said that while alternative fee arrangements work well for some practice areas, this is not the case for litigation – hence, value remains in the billable hour model.

“While technology and AI are reshaping legal practice and improving efficiency, the nuanced nature of family law often defies a one-size-fits-all pricing solution,” she said.

“Every matter and client is unique – be it a complex property settlement or sensitive parenting arrangements – so our work doesn’t always fit neatly into fixed-price packages.”

Unpredictable scope

As d’Apice explained, litigation – especially litigation of intermediate to high complexity – is very difficult to predict.

“Evidence you were previously unaware of might point you in new directions. Colleagues, clients, opponents, experts, and judicial officers might behave unpredictably,” he said.

“This volatility and risk is (based on my experience) best accommodated by a lawyer accounting to the client for the time they have spent, and then being paid for that. If the client is unhappy (and the lawyer has been diligent with their recording), then the client has enough information to question the lawyer and, if they are not satisfied, decide if they want to go elsewhere.”

Amid such unpredictability, d’Apice surmised, “the billable hour ensures the lawyer is paid for their time and the client is empowered to control their own destiny”.

Transparency

Billables, Fontenele outlined, allow for transparent, detailed tracking of the time and effort invested in each matter.

“It supports fairness, especially in cases where the scope is unpredictable or evolves significantly over time,” she said.

“Importantly, it ensures clients only pay for what they need, rather than subsidising bundled costs that may not reflect the actual work done.”

“Having researched heavily how fix, value or subscription models would work for our firm, it would be that some clients benefit and others lose, with those billing models,” she explained.

Inertia

Moreover, d’Apice explained, as a litigator who came up with the billable hour, he has spent almost two decades using this practice.

These skills, he explained, “are not merely time-recording”.

“They inform fine matters of litigation strategy, as well as HR functions and employee management. I do what I do now largely because it is what I have always done,” he said.

Evolution of billing models

This all said, Fontenele noted that as AI becomes more integrated in legal practices, there is “likely” to be a redistribution of how value is measured within the billable hour.

“AI can automate many time-consuming, process-driven tasks such as legal research, document drafting, and discovery review – areas traditionally billed by the hour. This will inevitably reduce the time required for certain tasks, which raises questions about how firms will balance efficiency with profitability,” she observed.

This is, she said, “not as a threat to the billable hour, but as an opportunity to focus our time on higher-order work – strategy, negotiation and client counselling – that AI cannot replicate”.

“The human elements of law, especially empathy, judgement and emotional intelligence, remain irreplaceable,” she proclaimed.

d’Apice did acknowledge that some clients will, in time, prefer alternative fee arrangements such as value-based pricing: “Some of are familiar with the frustrating experience of residential building work being charged on the cost-plus basis: ‘Why can’t the builder just tell me what it costs and charge me that?’”

“One might understand a law firm’s client feeling similarly,” he mused.

Ultimately, Fontenele concluded, the model may shift from purely time-based billing towards hybrid approaches, “where clients benefit from the efficiency of AI without losing the tailored support of their lawyer”.

To this end, she said: “The billable hour may evolve to reflect the quality and complexity of legal thinking, rather than just time spent.”

This will, Fontenele said, “bring us closer to the true value we provide as practitioners”.