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 that can lead to mental health issues for lawyers, poor outcomes for clients and even unethical practices such as unnecessarily protracting cases with a view to extracting greater funds and taking cases to lucrative hearings or trials rather than settling them at an early stage, and even overbilling; specifically, recording more time than is actually spent working on a case.

Such expectations ignore the fact much of a lawyer’s day-to-day work involves tasks other than billed work – including case management and other administrative matters, liaising with colleagues and various types of meetings – pressuring lawyers to work very long days and potentially leading to early burnout.

The situation has led to calls for such firms to review billing targets and even introduce fixed fee-type billing.

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

Less pay for equivalent work

While the large law firms do not generally publish the salaries of their lawyers, it has been reported that the total remuneration for an Associate Lawyer at Jones Day ranges from $90,000 to $180,000 per year, which includes base salary and additional pay, such as superannuation and performance bonuses where applicable. And it is important to bear in mind that an Associate Lawyer is more senior than a Junior Lawyer (to which the above table relates) and such lawyers will generally be paid less than Associates.

On a national level, the remuneration paid to lawyers in Australia is generally far less than that which is paid to lawyers in many other developed nations, such as the United States and across the the United Kingdom, with reports suggesting the starting pay in those nations is around triple that paid to lawyers in Australia, despite lawyers in our country being expected to bill similar hours.

In terms of actual daily hours worked, a survey conducted by Lawyers Weekly found that working over 50 hours a week is “not uncommon” across the Australian legal profession, and that a significant proportion of lawyers work more than 60 hours per week.

As regards working while on leave, 83% of lawyers report they are likely to work while on sick/carers or annual leave to reach their weekly 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.