Hourly billing across the pond

The war on hourly billing is being waged worldwide. Last week we talked about the battle in this country ("The billable beast of burden" and "The fool or the fool who follows him") and in Canada ("No hourly billing, eh?"). Yesterday, London's Financial Times had an article by legal correspondent Michael Peel saying that hourly billing may be on the outs in the UK as well. The article, with the promising title "UK law firms to reform hourly fee system," says that top London law firms are facing increased pressure from clients unhappy with large bills. Peel writes:

Top firms told the Financial Times that they were increasingly offering alternatives to hourly rates and making more use of cost-cutting business practices, such as putting services offshore. Tim Jones, head of the London office of Freshfields Bruckhaus Deringer, said that, although hourly billing still had a “fairly central role in most people’s thinking”, firms were increasingly offering clients deals such as fixed fees or rates tied to the success of transactions.

He said: “I think the big firms are very conscious that the efficiency of working practices is going to be absolutely fundamental in the coming years. We will have to look very carefully at how our terms are structured.”

The "efficiency of working practices," as Freshfields's Jones puts it, is the key point. Hourly billing, as we've said many times, discourages efficiency by rewarding inefficiency.

Peel reports that at Linklaters, another "Magic Circle" firm, a "significant amount" of the work is no longer billed by the hour. Peel does note that British firms have been somewhat slower than their American cousins in considering alternatives to the billable hour. But it's comforting to know that the opponents of hourly billing have allies overseas.