The rapid advancements we see in Artificial Intelligence (AI) technology touch every industry, and law is no different. Firms of all practice areas, from labor and employment to family law, are seeing the benefits of AI and recognizing how quickly those not adopting the new solution are getting left behind. This tech improves an attorney's efficiency on everything from discovery and research to drafting, allowing them to handle more cases and focus on other, more high-priority work. However, this increased productivity also means it's time to rethink traditional legal billing methods. The growing use of AI in law means it’s time to revisit alternative fee arrangements.
Legal billing has always been a challenge of balancing profitability with client satisfaction–both in contingency fee, billable hour, or flat fee based models. As AI takes over more tasks that were previously billed hourly, it’s time for the industry to rethink how to charge for those services. In this blog, we'll take a closer look at the fee arrangements that are becoming more relevant in a world where AI is changing the way legal work gets done.
Historically, the billable hour model has worked for law firms across fields. However, because generative AI solutions can take processes down from hours to just minutes. This model no longer aligns with the efficiencies gained through AI. For example, if a firm relies on a tool that can generate documents they need for the foundation of a case in just 10 minutes, billing the client for only those 10 minutes no longer reflects the value provided. The time saved through AI can instead be directed towards more strategic tasks, but that also means you must reconsider how you present and charge for your services.
On the other hand, clients are also becoming more aware of the use of AI in the legal process and may expect law firms to adjust their billing practices accordingly. As a result, everyone in the field needs to stay ahead of these expectations by exploring alternative fee arrangements (AFAs) that better align with the value you’re delivering.
A popular alternative to hourly billing is value-based pricing. This approach is all about the outcome - the value you deliver to clients, not the hours you put in. When you're using AI tools, this way of thinking becomes even more relevant. If generative AI helps you win a case more efficiently, the client isn't going to care how long it took. What matters is that their issue got resolved successfully.
To start using value-based legal billing at your firm, you'll need to have open conversations with clients about the expected outcomes and the level of expertise needed. Generative AI can help you deliver results faster, but you'll also need to set clear boundaries around what "value" means for each case. This means working closely with your team to rethink how you communicate the benefits of your services and your pricing.
AI also works well with flat-fee models, where you charge a set price for a specific task. AI tools can make repetitive tasks, like drafting discovery documents or handling routine intake, more efficient. This makes it easier to estimate time and effort, so you can charge a flat fee that gives clients predictability while you earn fair pay for the value you provide.
Take personal injury cases, for example. Your firm could offer flat fees for tasks like case intake and demand letter drafting, which can be automated or sped up with AI. Flat fees promote efficiency, rewarding quick completion without hitting you financially. But it's crucial that your flat fee covers not just the automated tasks, but also the strategic work that AI can't handle, like negotiations, depositions, or court appearances. These tasks still require human expertise and time.
Contingency fees, where the firm only gets paid if the client wins or reaches a settlement, are another area that could really benefit from AI. By automating routine tasks, your firm can focus on getting the client the best possible outcome.
But AI efficiency can also change how you calculate contingency fees. You might find that cases that used to require a lot of time and resources can now be wrapped up more quickly and with less effort. This means you should rethink your contingency fee structure. For example, you might want to negotiate higher fees for cases that involve complex AI-assisted work, so your firm gets paid for its specialized tools and expertise.
For companies looking to build strong, long-term relationships with clients, a retainer pricing model is definitely worth considering. With AI tools handling repetitive tasks, law firms can offer ongoing services like document drafting, compliance monitoring, and contract reviews on a retainer basis. This model lets clients pay a fixed monthly fee for ongoing legal support, and the firm gets to enjoy predictable revenue. Thanks to AI-driven tools, a lot of the routine work that makes a retainer service tick can be automated, freeing up lawyers to tackle more complex cases without getting bogged down in routine tasks.
For instance, a big corporate client might need regular updates on changes in regulations, which can be taken care of automatically by AI. By including this in a retainer, your firm can keep delivering value to the client without needing constant hands-on work from the lawyers.
Many law firms find that a mix of billing models works best with AI. The complexity of a case can be a big factor in which model to use. Routine tasks like drafting documents might work well with a flat fee, while more complicated tasks like court appearances or negotiations might be better suited to hourly billing.
In a firm, it’s up to everyone involved to choose the right legal billing model for each task, or even each case. AI gives law firms a lot of flexibility, but that flexibility needs to be balanced with a thoughtful approach to billing. A hybrid model lets you tailor your services to each client's needs while keeping your firm profitable.
Generative AI is transforming the legal landscape, and with it, the way law firms approach billing. Exploring alternative fee arrangements is key to showcasing the value your firm brings with AI-driven efficiency. Whether it’s through value-based legal billing, flat fees, contingency fees, or a retainer, the goal is to create pricing structures that align with both client expectations and the realities of modern legal practice. By embracing these alternative fee arrangements, your firm can not only stay competitive but also ensure long-term growth in a legal field where AI use is becoming the norm.
If you’re ready to get ahead of the curve and augment your firm with an AI solution tailored to the unique challenges of the labor and employment or personal injury fields, Eve is built for you. By letting Eve handle much of your routine tasks, you can empower your team to handle more cases with more efficiency. Schedule a demo to see for yourself how Eve could transform your processes and get you to the next stage of your growth now.