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A Rational Basis for Setting Hourly Rates

By Ed Wesemann and Michael Roch
February 01, 2007

For the past 20 years, law firms have annually increased their hourly rates on the basis of various ad hoc criteria ' what the market will bear, matching the competition, cost-plus, maintaining profit margins ' that neither firm members nor clients find satisfactory. Alternative pricing methods (fixed fees, percentage of the deal, etc.) have long been advocated as a solution to hourly billing discontents, but in practice, for a large majority of firms they remain limited in application. Firms whose clients expect fees to be charged on an hourly rate basis therefore require a rational means of constructing an hourly rate schedule that is transparent and acceptable to clients as well as defensible within the firm.

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