What is a reasonable number of hours of billable work for a lawyer?
According to Thomson Reuters Legal’s latest State of the Legal Market Report (2019), which tracks larger law firms, the average hours billed per lawyer in the year 2018/19 was 1,180. This was down by 3% on the previous year.
Assuming four weeks of annual leave plus one week for public holidays, there are 47 working weeks per year. 1,180 hours divided by 47 weeks is 25 hours per week or five hours per day.
Larger law firms dealing with ‘blue chip’ clients would expect to get their bills paid. Let’s make the slightly unrealistic assumption that this five hours per day equates to five hours per day of fees recovered.
Five billable hours seems too low. 1,180 hours per year also seems too low. By comparison, the top tier law firms in New York are renowned for encouraging their lawyers to bill 2,000 hours per year.
The Thomson Reuters report refers to ‘average’ lawyer. The report is based on the financial data provided by 16 firms (Australian offices only) The largest eight firms by lawyer count of Australian offices in the analysis average 697 lawyers. The remaining eight firms by lawyer count of Australian offices in the analysis average 260 lawyers.
Even speculating that junior lawyers bill low hours and senior lawyers bill high hours, it does not fit in with the reports we regularly hear about lawyers working extreme hours, such as leaving work at 11pm, working weekends and all-nighters.
What are Australian lawyers in the big firms doing with their time? Here are some possibilities: Pro Bono work, non-chargeable work for clients, business development, continuing education, contingency work (unlikely) and admin.
The majority of lawyers in large firms still work full time. The report does not specify whether the average lawyer is employed full time equivalent or works fewer than five days per week. We are making the assumption of full time.
Technology has made it possible to work from anywhere at anytime and to easily record billable work.
Just one more hour of billable work each day in a large firm, for example at $500 per hour equates to an additional $117,500 in revenue per year. This extra revenue is almost all profit. Given that overheads and people are in place, one more billable hour per day makes a huge difference to profitability and earnings.
It would be reasonable to draw the conclusion that lawyers in Australia’s largest firms are on average underutilised. If they are working harder than ever, then it is work not being paid for by their clients.
The Legal Market report can be accessed here: