The billable hour: Time is money. Or, is it?

Support For Lawyers

Support For Lawyers

In law, time really is money… for now. The billable hour business model is ubiquitous. In theory, it is designed to maximise productivity and serve as an objective, quantifiable measure for invoicing clients. Increasingly, though, this traditional model is under threat. The billable hour has gained notoriety for its detrimental effects on employee wellbeing, client trust, and efficiency. And with rising operational costs, advancements in efficiency-enhancing technology, and increasing client buying power, money for time seems a risky strategy. So, why do law firms persist?

Stressed resources

We’re supposed to believe in the billable hour model’s benevolent power to motivate efficiency, generate high-quality work, and ethically justify high professional fees. In reality, the commoditisation of time is an emotionless tool for comparing employee performance, promoting competition, and maximising profits. And there is extensive evidence that this business-centric model pushes our key resources – our people – to the limit, or beyond.

Studies from James (2017), Bergin and Jimmieson (2014), and Cadieux et al. (2022) discuss how billable hour targets drive toxic competition and incivility. In a profit-based value system, the ‘win at all costs’ mentality drives unreasonable demands, hostile office dynamics, a profit-based hierarchy, and belittling tactics. Those reaching or exceeding targets gain rewards like financial bonuses, promotions, and prestige. Whereas those failing to meet targets face the ‘weak link’ stigma, admonishment from management, a stalled career journey, and even public humiliation (i.e. in cases where billing statistics are transparent to all). In a study that surveyed nearly 2000 legal professionals, Krill et al. (2022) established employees valued for their financial achievements and availability to work suffered poorer wellbeing than those valued for professional skill and their innate value as human beings. They reportedly consumed more substances to cope with stress and/or boost performance and stated they were considering leaving the profession due to stress, burnout, or poor mental health.

Krill et al. also discussed the “performance-health paradox”. Profit-centric business practices contribute to a culture of overwork and even well-intentioned efforts to promote wellbeing typically fail in the profit-driven environment. The studies from Parker and Ruschena (2011), Cadieux et al. (2022), and James (2017) found billable hours represent between 50%-70% of actual worked hours. So, professionals face pressure to extend working hours (as much as doubling them) to meet billing targets. Unsurprisingly, the recent Lawyer Wellbeing, Workplace Experiences and Ethics report (Holmes et al., 2025) echoed other research findings that increasing billing targets are synonymous with a decreased commitment to the profession. Participants stated the effort-reward imbalance was the top reason to leave law, with excessive, unsustainable working hours and lack of work-life balance cited as the main contributors.

In the danger zone: profit over ethics?

Clients are a law firm’s key source of revenue. However, time-based billing can erode trust and drive clients away. Reich (2020) posits that the billable hour is merely a measure of time doing a task. It does not consider quality, efficiency, or utility. And given the overwhelming research linking time-based billing to poor employee wellbeing, it follows that these measures of performance and client value are negatively impacted. Hence, the billable hour is actually a measure of diminished productivity. Worse still, the degree of billing pressure correlates with the temptation to exaggerate hours and meet targets. While this maximises profits for the firm, it conflicts with the duty of care owed to clients.

Client vulnerability cannot be understated. Legal matters are stressful – even more so when protracted. So, we have a professional responsibility to resolve matters as promptly and reasonably as possible. Under the billable hour model, though, there is little incentive for the early resolution of disputes and passing on savings the law firm makes from technology use or outsourcing. As a consequence, clients may suffer additional stress from bill shock and, depending on the outcome of their case, are unlikely to provide repeat business to the firm.

Supporting your people. Supporting your clients. Supporting your business.

Despite past hesitance, every firm should be questioning the value proposition of the billable hour model. Thomson Reuters’ Australia State of the Legal Market 2025 report found, “The Australian legal market is entering a new phase, one where agility, client value, and operational discipline will matter more than either legacy prestige or a newcomer’s innate potential to disrupt.” The Australian Productivity Commission (2023) recommends the country work smarter, not harder. And the method is simple.

The legal profession’s key resource is its human capital. The Productivity Commission suggests supporting your people by providing the resources that enable them to work more efficiently. This type of investment is proven more effective at increasing productivity than increasing hours of work. Remove the factors that undermine employee wellbeing, like billing pressure, toxic competition, and a lack of work-life balance. Because when employee wellbeing improves, so does the quality, efficiency, and utility of their work. And don’t underestimate the importance of a healthy, thriving law firm culture for attracting and retaining the top talent.

As clients are your key source of revenue, protecting their interests is critical. And with client interests firmly rooted in fairness, cost certainty, and the quality of work and outcomes, both operational efficiencies and value-based pricing are highest on their wish lists when choosing a law firm or giving repeat business.

Supporting your people supports your clients and your business. The industry is changing, and the ‘time is money’ stance no longer holds ground with top talent nor high-value clients. The billable hour model is a legacy you can no longer afford.

References

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