Giving Service
Amongst the recent reports regarding the earnings of young City lawyers at firms of solicitors, many will have been astonished to see that apparently newly qualified City solicitors are paid an average of £60,000 per year, more than double the rate of 10 years ago. However amongst the statistics was another figure that was far more astonishing.
This was the figure for salaries for trainees, suggesting they earned an average of about £35,000. Given that many trainees would say that a fair amount of their time was spent doing photocopying, it would be interesting to see how clients generally are billed for such work.
Certainly the traditional view for staff has always been that the firm should be looking to bill three times the salary cost. That has come under pressure because American firms entering the City have been very aggressive in terms of the salaries offered, no doubt looking to acquire market share first and worry about markup later.
This gives rise to further issues about billing in present changing legal landscape. It is plain that the Legal Services Act will not be fully implemented for some years. However it is all part of a process whereby a more "commercial" environment and business structure is likely to come to the fore in legal services.
How clients are billed will be a key part of that. Solicitors are already in some circumstances finding they have to be creative to obtain and maintain particular accounts. That pressure is likely to intensify. It is also likely to intensify financial pressure on the Bar, because insofar as firms are tying their fee structures to global amounts (or of global amounts) for litigation, they will be looking to cut costs elsewhere as part of the quid pro quo.
In the outside world the concept of the billable hour and rate as the keystone of charging still seems somewhat anachronistic. Even where hourly rates are applicable, that would normally be by reference to a starting point as to what number of hours one would expect, with it being adjusted for contingencies. No commercial bargain would ever normally be set on the basis that a party which was slow at doing work would be paid more accordingly.
Ironically, depending upon the nature of the client and how assiduous they are about scrutinising or charging billing, this can actually mean that substandard associates can be used successfully. They do the work, take their time about it (not deliberately, but because of the way they are) and bill a large number of genuinely worked hours accordingly. The clients will be billed for a standard charge at rates appropriate to seniority which tends to make hourly rates gravitate towards a particular mean of standard cost rather than relating that to efficiency. On a time charge basis which is not related to any sort of measuring point that will be chargeable to the client (even if it is knocked down on assessment against the other side where they are eventually paying the costs). Even if this inefficiency is only in practice adding 5% to the billable hours over a year, that can clock up to a considerable sum.
It is inevitable that pricing structures will move away from hourly rates. How firms will cope (and how particular individuals at firms will cope) with that increasingly changed structure will determine the winners and losers in the changes to the world of legal service provision.