Wednesday, January 9, 2013

Time to Evaluate Billing Rates?

Parsley Sage Rosemary & Ginsburg LLP
“Always a reasonable result for a reasonable fee, always”
MEMORANDUM

To:
Managing Partners; Practice Group Leaders
From:
Mike Marget
Date:
January 9, 2013
Re:
Time to Evaluate Billing Rates?  What to Consider

        Although this may have no application to your particular practice, Big Law raised their hourly rates in 2012 despite all the chatter about clients having the upper-hand in fee negotiations.  According to 55 Legal Industrial Complex firms surveyed by The National Law Journal, the median partner hourly rate increased by 4.5% to $517 and the median associate rate jumped 3.5% to $323. 

        If your firm has been thinking about tweaking billing rates – whether across-the-board, for specific individuals, applicable to a specific practice area or just for new clients or new matters opened from some date forward – here are a few things you might want to consider: 

1.   Can some of the partner rates be increased to narrow the gap between them and the partner with the highest hourly rate?

2.   Can individual associate rates be increased to reflect increased seniority, experience and efficiencies?

3.   Is the gap between the lowest partner rate and highest associate rate appropriate for what each individual brings to the table?

4.   Are paralegal rates generating sufficient “profit” for the firm (e.g., there is an old adage that paralegal productivity should be 1/3 comp and benefits; 1/3 to cover overhead; and 1/3 contributed to partner profits)?

5.   Will “the market” permit increases for lesser-productive timekeepers to narrow the pay-versus-performance gaps?
 
Increasing rates is always a sensitive matter, but remember:  You can always negotiate downward and a 10% discount from $260 an hour is preferable to a 10% haircut from $250.

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