What are billable hours and what do students need to know about them?
24 June 2014 | By Becky Waller-Davies
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Many a trainee has shuddered at the thought of having to record how they spend every minute of their working day. But there’s really nothing to worry about – at least until you’re qualified
The lawyer’s clock is meant to cause concern only for a nervous client, terrified of the final bill.
It is a stereotype that crops up with deceasing regularity, although last year lawyers at DLA Piper came under scrutiny when emails came to light crowing: “Churn that bill, baby!.. That bill shall know no limits.” Of course, DLA insisted that its client was not over-billed and the emails were simply a result of its lawyers’ attempts at humour.
But while clients can relax in the knowledge that the increasing popularity of fixed-fee and retainer services means they are not in for any nasty surprises, young lawyers are left wondering whether their failure to rack up the hours might set the clock ticking on their time at the firm.
What is a billable hour?
A billable hour used to be the most common method of charging a client for the work of a lawyer. Different bands of lawyers at different firms cost different amounts and clients would pay by the hour for a lawyer’s advice and behind-the-scenes work on their deal or case.
This is changing, though. Billable hours still exist in many areas but other methods of billing, such as fixed-fee or retainer services, have started to take over.
“Fixed fees and capped fees have been part of the market for a number of years,” says Hogan Lovells partner James Doyle. “While we internally record time, the fees are often on a fixed basis. Sometimes charging is done by the number of hours, but increasingly clients are looking for other arrangements.”
Although fixed fees are starting to take over, firms still use a billable hours model for internal purposes, to forecast revenue and benchmark employees’ performance.
“One of my long-term clients is a sophisticated purchaser of legal services, and his response to billable hours is, ‘I don’t really care about the lawyer’s clock, I just want to know how much it will cost me’,” says one graduate recruitment partner. “But that doesn’t affect the hours that we write down. If you are at zero utilisation, you have zero income. So for internal purposes you still write down what you are spending time on, it just doesn’t translate directly into a fee.”
Instead, billable hours are used as a measure of how busy the firm and its lawyers are.
How do you measure one?
Billable hours, and ultimately utilisation rates, are measured by recording time in six-minute intervals, often onto a dashboard on a lawyer’s computer desktop.
“Like all big international firms we have an electronic time-recording system,” explains Weil Gotshal & Manges graduate recruitment partner Jonathan Wood. “So activities like printing and filing will be stored under a specific client file or under an internal file code for non-chargeable work. We can then track what people are doing and what they are spending their time on.”
Trainees get inducted into this way of life from day one, regardless of their firm’s take on billable hours targets.
“It’s a difficult discipline to maintain because, as with any job, you often get interrupted and are constantly doing different things,” adds Doyle. “You need to be disciplined in putting your timer on for one thing and turning it off for another.”
Just because trainees are measuring their day in six-minute intervals does not mean those intervals are under intense scrutiny.
Firms vary in their commitment to billable hours targets. Some completely eradicate targets for trainees, reasoning that trainees have little control over how they spend their days. Others will put trainee targets in place but approach them differently to the way they might approach qualified solicitor targets.
“Trainees at Taylor Wessing have the same targets as a fee-earner, but there is an understanding that as a trainee the firm is investing in them and their future,” says graduate recruitment partner Tim Worden. “While we look at how busy they are, it is not an integral part of the seat appraisal, whereas with an associate that changes.”
Wood takes a different view. “While we want trainees to be busy, we only want them to record their time for management purposes,” he says. “It is up to us, the partners, to see that what they are doing is enough to keep the firm going.”
Like most junior employees, trainees have little control over their working days. Unlikely to bring in their own clients, they are mainly at the mercy of senior associates and partners for work.
Despite this, trainees tend to worry about spending enough time on client matters.
“When you are a trainee or a newly qualified lawyer (NQ), there is really not much more you can do than ask around internally and see if you can get more senior people to give you stuff to do,” says Wood, while Worden emphasises how important it is to seek out work.
“It is true that you are being fed work by partners or senior associates,” he says. “But it is also down to you to make it known that you have the capacity to take on more chargeable work.”
But if your department is simply quiet and trawling the corridors for more work does not throw up any major projects, then setting your sights on business development is often a good idea.
This type of work is incredibly valuable to the firm, even if it cannot be charged to clients, and allows trainees to see the inner workings of the business. It also helps to develop commercial awareness as trainees learn the benefits of certain strategies employed by the firm.
So while billable hours should certainly be on every trainee and NQ’s radar, a fear of them should not be. After all, as Doyle says: “There are soft and hard targets. And it doesn’t follow that if you don’t meet your target then that’s it, you’re out.”
Billable hours: the facts behind the fear
Associates are often said to be under strain, fearing that they may not meet billable hours targets. Here’s what a commercial litigation associate based in the South West had to say:
“I think that billable hour targets vary from team to team and firm to firm.
When I was a trainee, there was no mention of billable hours really. It was mentioned in conjunction with being told that as trainees we had very low targets. But then going through, seat to seat, appraisals did not mention it too much.
But when I qualified I became very worried about it. I didn’t know what to expect. Would I be sacked after six months because I wasn’t performing?
I didn’t know whether I would be expected to hit only 50 per cent of the target, I didn’t know whether the target was achievable. And I didn’t know who to ask, so I didn’t ask anyone.
I learned through experience that it is actually easier to measure my day. And then the annual targets will take care of themselves.
That was not something I fully understood until I had been doing the job for a couple of years. I know that on average I need to be doing six hours a day. I sat down with a calculator one day and thought, if I take out some time for training, if I take out some time for holidays, if I am doing six hours a day I am going to be okay.
Firms will vary – some might need five and a half, some six and a half, and some in London a lot more than that.
Not reaching targets was sometimes scary but the reality was, as long as I communicated the reasons to the partners then they had an appreciation of my situation.
The best thing, in my experience, is finding non-chargeable work to do when you’re quiet: marketing and so on. If I am unable to go out and seek work then at least I am able to account for my hours and add to the firm.
A firm does not expect an NQ to bring in work. As long as the communication is there and you are trying to find non-chargeable work, that is enough.
My initial fear was that it would be curtains for me if I failed to reach a target. The reality, I was relieved to find out, is that targets are meant to assist you and to benchmark. It is more a tool to assist the firm than a stick to beat the lawyer with.”
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