What Are the Billing Targets for Lawyers in Australia?

A study conducted earlier this year by the Australian Financial Review (AFR) found that first-year lawyers in some of Australia’s biggest law firms are expected to bill 6.5 to 8+ hours a day, which equates to 32.5 to 40+ hours a week, or 1450 to 1800+ hours a year – an unrealistic expectation which leads to mental health issues for lawyers, poor outcomes for clients and even unethical practices such as unnecessarily protracting cases with a view to extracted greater funds, taking cases to lucrative hearings or trials rather than settling and even overbilling; in other words, recording more time that was actually spent undertaking legal work.

The expectations ignore the fact that much of a lawyer’s day-to-day responsibilities involve tasks other than billed work – including case management, meetings, liaising with colleagues and administrative tasks – and pressure lawyers into working very long days, potentially leading to early burnout.

The study

The AFR study focused on large law firms, many of which employ thousands of lawyers across Australia and abroad.

The results are summarised in the following table: 

The average hourly rate for a first-year lawyer at these firms is generally between $400 and $450 + GST per hour, which equates to between $580,000 and $652,500 + GST per year for firms expecting 1,450 hours of billed work per year, and between $720,000 and $810,000 + GST for firms expecting 1,800 hours of billed work per year.

Less pay for equivalent work

While the large law firms generally do not publish the salaries paid to their lawyers, it has been reported that the pay rate for an Associate at Jones Day ranges from $90,000 to $180,000 which includes base salary and additional pay, such as superannuation. And it is important to keep in mind that an Associate is more senior than a junior lawyer, to which the above table relates.

In fact, the pay rates for lawyers in Australia are far below those paid in nations such as the United States and countries of the United Kingdom, with reports suggesting the starting pay in those countries is around triple that paid to lawyers in Australia, despite those in our nation being expected to bill similar hours.

A survey conducted by Lawyers Weekly found that working over 50 hours per week is not uncommon in the Australian legal profession, with a significant percentage of lawyers working more than 60 hours per week and 83% of lawyers reporting they were likely to work while on leave to reach their billing targets.

A lose/lose for clients and lawyers

The situation leads to many lawyers suffering serious mental health issues such as depression and anxiety, as well as the resulting physical problems such as high blood pressure and overall poor health, which can lead to early burnout.

At the same time, clients are put in a position of having to be serviced by fatigued legal representatives facing billing pressures rather than focusing on obtaining the best possible result in the shortest period of time.

The situation is a ‘lose/lose’ for both lawyers and their clients, and has led many firm to introduce fixed fees for legal services, thereby ensuring financial transparency for clients and reducing billing pressures, thereby enabling lawyers to focus on the best interests of their clients.

Shift towards realistic quotes, lower expected billables fixed fees

Indeed, the Law Society Journal published an article in 2019 titled ‘The slow demise of billable working hours’ which outlined the benefits of what it termed ‘value-based quoting’ – which includes realistic quotes and, in appropriate cases, fixed fee services.

The article emphasises that with the rapidly growing number of law firms across the nation, legal services is a ‘buyer’s market’, and “[w]ith fixed fees, you can now compare lawyers through online reviews and digital profiles, and this shift in supply and demand is creating the opposite incentive of billable hours.”.

It outlines that fixed fees and realistic quoting for time-costed cases provides greater transparency for clients and has the potential to reduce pressures on lawyers, especially where lump sum fees are offered for cases.

And in a positive sign, a number of law firms are adopting realistic billing targets for lawyers – often half of that expected by the biggest law firms – which can result in a win/win for both employed lawyers and their clients, reducing pressure and resulting mental health issues for lawyers and enabling them to have the state of mind to provide high quality legal work.

But while the largest law firms in Australia continue to reap the financial benefits of extracting exorbitant sums from clients while paying their lawyers a fraction of what they are paid in other developed nations, there is little impetus for them to adopt such models.