The Future of Legal Fees

Under the title “The Billable Hour is dead, long live the Billable Hour!”, he explores why the traditional hourly billing model continues to hold its ground despite persistent criticism — and why its survival is nevertheless coming under increasing pressure.

Amid the tension between clients’ rising expectations for predictability and transparency, growing competitive pressure, and rapid advances in AI and supporting technologies, one thing is clear: purely time-based compensation is increasingly unable to adequately reflect the economic value of legal services. At the same time, practical and widely accepted alternatives are often still lacking.

This article advocates for an open, even self-critical examination of existing models and for the development of new, viable billing approaches that meet both the needs of clients and the business requirements of the legal profession.

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English translation of the article published in the latest issue (3/2026) of Anwaltsrevue (available at anwaltsrevue.recht.ch):

“The Billable Hour is dead, long live the Billable Hour!”

The billable hour has been the standard method for billing legal services for decades. It allows clients to review, in detail, the time spent, and it allows law firms to record their work for accounting purposes, monitor workload, and set budgets.

Contrary to all predictions, this billing method has not (yet) died. With the rapid advancement of supporting software — especially in the field of artificial intelligence — its days now do seem to be numbered.

The Elbphilharmonie syndrome: client bias, adviser Armageddon. Put differently: where lawyers accompany clients across terrain the clients themselves have not yet sufficiently mapped — starting from an uncertain point of departure, heading in an unknown direction, toward only a vaguely visible goal that may be continually shifting — fees not infrequently get out of hand. Guaranteed. Of course, the unexpected must be expected. But anyone who wants to create real added value in the legal-services market must identify, assess, and keep under control — throughout the entire engagement — the catalysts for surprising or excessive fees, together with, and supported by, the client. A real challenge. If it is not mastered, frustration follows — on both sides: lawyers are left holding the bag with their (often quietly) heavily discounted hours. And the level of fees still imposed on the client continues to meet with little understanding.

It was initially those seeking legal services in common-law jurisdictions who called for an “honorarium revolution”: the billable hour compensation model was said to be unpredictable, to reward inefficient or even unnecessary work, and to create a disconnect between compensation and tangible added value. Before long, the venerable continental European “Advokaten”, “maîtres”, and “illustri avvocati” were driven along as well — by harsh, tightly controlled, capped, and uncompromisingly enforced compensation systems.

At least this much is true: cost estimates and cost controls, as well as flat fees and reasonable fee caps, are now part of the rightly expected standard repertoire even at smaller and mid-sized law firms — at least for simpler or more predictable matters. Nevertheless, the billable hour as the foundation of lawyers’ billing arithmetic is holding on tenaciously. Is it turning into the undead?

More recently, it is the legal profession itself that has — more or less passionately — thrown itself into the whirlpool of change, including in the area of fee arrangements. The profession has recognized that an increasingly competitive environment, with its focus on the realities of the respective industry, requires change and new ideas. What is needed are alternative fee models — models that provide the demand side with sufficient planning certainty and predictability, while still being economically viable for law firms. Market pressure, diminishing pricing power, and the continuing need for profitability make an unreflective clinging to the billable hour untenable in the long run.

Despite all the complexity of many products and services offered worldwide today, despite countless customization options — even in high-volume business — the economic value of what is offered is hardly ever calculated, and certainly not exclusively, on the basis of time spent. In most sectors of the economy, there is no longer any acceptance of compensation “based on the duration of jigsaw use.”

The direction of travel is therefore clear for the legal profession as well: an objective, critical — and also taboo-free — engagement with the question of the (in each case) right compensation model.

The fee dinosaurs standing in the way?

• Courts and other authorities that decide on party compensation, the compensation of court-appointed defense counsel, or legal aid counsel are unlikely to want to abandon the itemized bill that is based on time spent (which in any event is only partially compensated).

• And under the professional rules, it still seems almost frowned upon not to bill in detail based on time incurred. Alternative fee models that (at least too far) depart from the billable hour are (still) difficult to reconcile with the profession’s self-image as anchored in professional-regulatory law.

• And clients? In the procurement market, and also vis-à-vis many of their (non-advisory) suppliers, they have mastered the craft of making prices predictable and reliable, and of estimating and controlling corresponding developments — admirable. However, adapting that business know-how to the area of sought-after legal services has not progressed very far. Too often, the terrain remains insufficiently understood, the point of departure uncertain, and the goal continually shifting. Not only are lawyers inexperienced with alternative fee models — clients, too, still have little experience with the topics relevant to them. Without far-sighted initiative from our profession, this mutual deficit will only be overcome painfully. And those who will suffer first and foremost are us attorneys.

• We attorneys still simply lack a clear idea of how the economic value of our services can be measured independently of time spent. Only once we see more clearly on this point can we use alternative fee models not merely to overlay the billable hour, but to effectively replace it (where necessary or appropriate).

The skillful use of AI and other modern technologies — which are also developing rapidly in the legal-services sector — will provide us attorneys with substantial support as we search for, develop, and apply innovative, future-proof alternative fee models. We still lack the necessary fitness — so timely training is essential.

Supporting software does, of course, create new costs — massive costs that can hardly be fully offset through efficiency gains. From a business perspective, passing these costs on appropriately is likely unavoidable. Once again, the question is how the market will react. At least this much is true: when it comes to dealing with such costs, clients are trained in their own affairs. They are therefore likely to be able to place entrepreneurial decision-making in this regard far better than they can with respect to the increasingly outdated billable hour.

For us attorneys, compensation therefore remains a core issue—or perhaps it is only about to become one.

The Swiss Bar Association is monitoring the debate on the remuneration of legal services and is conducting an in-depth examination of the significance of AI for the legal profession.