How do solicitors charge for their services?

How do solicitors charge?
A solicitor was once asked if he could be any animal, what would he be and why? The solicitor said he would be a Rhino because he knows how to charge. A witty answer but one which probably did not reflect very well on the solicitor.  

Basis of charging
Most service providers calculate their charges on a simple, time spent x hourly rates basis. For example, a builder, electrician, mechanic or plumber etc will charge an hourly or even daily rate for their services. With the exception of fixed fees (which are usually based on a pre-determined amount of time) and solicitors are no different.

If a solicitor charges £200 per hour. When adding VAT, this becomes £240 (at the current VAT rate of 20%). Therefore, for every hour the solicitor spends on your case, subject to any adjustments, they will charge £240.

Each hour is broken down in to units of 6 minutes so there are 10 units in an hour (6 x 10 = 60 minutes). If the solicitor makes a quick telephone call to a client which lasts 5 minutes, the cost of that call will be £20 plus VAT.  If the call lasts 8 minutes, the law firm will usually have a policy which requires the solicitor to round this up to 2 units so £40 plus VAT. At £200 per hour, each unit of six minutes is worth £20 plus VAT (200 / 10 = £20).  

A law firm should, as a matter of good practice, check an invoice and the amount they are going to charge the client, compare this to the quote or estimate previously provided to ensure that it is innkeeping with that quote or estimate and make any adjustments necessary to ensure that the amount is reasonable and proportionate.  

Fee targets
Most legal practices especially commercial firms will set daily hourly targets for their 'fee earning' employees. This includes partners, directors, solicitors, legal executives and paralegals (collectively described as 'lawyers'). The targets vary from firm to firm. Some firms will require their solicitors to reach as much as 7 hours chargeable time per day whereas some may require five hours per day. At an hourly rate of £200, this is £1,400 per day and £7,000 per week (over 5 days). Unless the lawyer is working on a big case which is taking up all of their time, the daily targets are generally spread across a number of different cases that the solicitor may be working on during the day.

At Sewell Law, unlike most commercial firms, we do not operate with hourly targets and we believe that it is practice within the legal profession that should be prohibited.

Hourly rates
A law firm has a discretion to set the hourly rates for the 'fee earners' it employs. The level of the hourly rate is based on a multitude of factors including:

• Position, qualification, specialisation and experience of the fee earner. An experienced partner in a law firm who is a specialist in a particular area of law is likely to command a greater hourly rate than someone who is more junior and less experienced.

• Type and size of law firm. A large commercial practice will have large overheads including offices, equipment, support staff, partner and other fee earner salaries. These overheads help determine what the firm should charge for its services.

• Location of the firm. This plays a key role in determining the hourly rates and to assist the Courts and ultimately members of the public, His Majesty's Courts and Tribunal Service ('HMCTS') has issued a table of guideline hourly rates which can be found here.

Guidelines  
In 2010, a useful set of guidelines was introduced by HMCTS to assist the Courts is in the assessment of legal costs. In a litigated case, if a Court decides to make an order on costs, the Judge will consider the hourly rates charged by the party seeking to benefit from the order (the receiving party). The guidelines assist the Court by providing a useful barometer of what is generally considered to be reasonable, although the Court is not bound to follow these and other factors may come in to play.  

The guidelines categorises the hourly rates by experience and geographical location.  To check your solicitors hourly rates against the guidelines, compare what you are currently being charged, the grade of your solicitor i.e. A, B, C or D, and the geographical location of the firm you are using. The grading of the solicitor depends on their level of experience. For example, a solicitor or legal executive with over 8 years experience, is classified as grade 'A' whereas a trainee or paralegal is a grade 'D'.  

It is not unusual for commercial law firms to charge more that the guideline rates. However, at Sewell Law we believe that the guideline rates should not be exceeded. After all, these are the hourly rates which HMCTS consider reasonable. A table showing how the hourly rates of Sewell Law compare to the guidelines can be found here.