By now, you’ve likely heard a lot about various types of attorney fees. Prospective law school students talk (and give a lot of law career advice!) about which types of lawyers make the most money, which law schools will get you the best jobs, and the average amount of money law school grads make after they graduate.
Other students plan to open their own practice upon graduation. But if you do this, how will you decide which types of attorney fees you will charge?
There’s a few types of attorney fees, and each structure has its benefits and draw-backs. There’s contingency fee cases, flat fees, and hourly billing practices. In this article, we’re going to look specifically at flat fees and billable hours.
What Are Billable Hours?
You may have heard the word retainer before. This is a lump sum of money a client pays into an escrow account. The attorney holds that money and works on the case. As he puts time into the case, he pulls money out of the retainer until it gets to zero. Then he asks the client to replenish the retainer.
For all the time an attorney puts into the case, he bills the client at an agreed-upon hourly rate. When I was in Colorado, my hourly rate was $225 per hour. As long as I was working on a case, I was making my firm money. The more hours I billed on a case, the happier my managing law firm partner was.
In an 8 hour day, you are doing good if you are able to bill 6.5 hours. Law firms typically require their associates to bill a minimum amount of hours each year. 1,400 to 1,800 hours in a years isn’t uncommon. (Some law firms require more, and some require less.)
What About Flat Fees?
Flat fees are exactly what they sound like. A new client comes into a law firm and signs up. Instead of paying a retainer to get slowly depleted, with no cap on the overall cost, the client and the law firm agree on a set price. The client can then make monthly payments, or pay in full, and the attorney does the work they agreed upon.
Flat fees give clients certainty as to how much they’ll spend in total on their case. And while this can cause the clients to breathe a sigh of relief, it is risky for the lawyer.
It is risky to offer flat rate attorney fees because a case may end up taking an exceptionally long time. It may take much longer than the attorney anticipated at the outset. This means that the attorney ends up working longer and harder on a case, but does not make any additional money over and above the flat fee.
That was a brief synopsis of two types of attorney fees. Contingency fees are also available, but are only allowed in certain types of cases (like personal injury). So if you are trying to decide how to be adequately compensated for your work once you graduate from law school, hopefully this gave you a bit of insight.