What does legal AI mean for the billable hour?
The shift from the billable hour to a fixed-fee model in the legal industry has been gaining momentum. The Financial Times wrote about it last month and I was asked about it on the London Law Expo podcast this week (you can listen to the full conversation below). It’s important to note that this is a topic that’s not just being discussed in media circles, but within law firms and boardrooms too, as clients increasingly seek out greater cost transparency.
The problem with the billable hour
The billable hour was developed when manual, time-intensive legal work was the norm. While it accounted for unpredictability, it incentivised longer work periods instead of focusing on the value delivered.
With generative AI now making routine legal tasks predictable and quick, law firms can accurately assess the time involved and charge a fixed fee. This provides greater clarity for clients and helps firms align their billing practices with modern client expectations.
Law firms that adopt this approach will find themselves at a competitive advantage. Research consistently shows that large corporate clients are increasingly pushing for alternative fee arrangements (AFAs), including fixed fees, particularly for routine legal tasks. Fixed-fee and value-based pricing models are becoming increasingly common in sectors like accounting and consulting.
Despite evolving expectations, there’s a natural reluctance to change in industries like law where tradition runs deep. Many lawyers built successful careers on the billable hour model, so it’s understandable that they question whether shifting fixed-fee models, or AI-driven processes is necessary. But just because something has been done a certain way for decades doesn’t mean it’s the most effective or sustainable approach moving forward.
How AI can change legal work
AI has made it possible to maintain or even increase the quality of legal services while reducing the time required for routine tasks. Of course, this is heavily influenced by where you deploy it and the quality of the AI platform (you can read more about what to look for here).
Take contract review, for instance. Previously, a junior associate might have spent an entire day combing through a contract for compliance issues and potential risks. With AI, that same contract can be reviewed in seconds—with the same, if not better, accuracy. AI scans the document, flags any non-compliant clauses, and highlights risks, while also providing real-time suggestions for improving the language.
Compliance checks are another area where AI makes a huge difference. It can keep track of regulatory updates and ensures that the documents you’re working on are always up to date with the latest standards. This automation not only reduces the workload but also minimises the risk of missing key legal changes.
AI transforms document drafting too. Instead of manually drafting a contract from scratch, it can auto-fill standard clauses, recommend tailored adjustments, and create drafts in minutes. Lawyers can focus on strategy, while the repetitive parts of drafting are handled by the AI.
More strategic advice, less admin
Tasks like document review and compliance checks, have always been less about applying legal expertise and more about carrying out repetitive, administrative work that few lawyers aspire to. AI is making the billable hour model redundant for this kind of manual, time-intensive legal work, as tasks that once took hours can now be completed in moments. This doesn’t mean less billable work—it just shifts the metric of value. AI doesn't devalue legal expertise, but instead highlights its importance by removing the need for human involvement in repetitive tasks. Client budget can go to funding strategic legal advice that gives your team an opportunity to shine.
