What Are Billable Hours And How Do They Work?

What Are Billable Hours And How Do They Work?

If you’re a law student and haven’t worked in a law firm before, you may be curious about billable hours. The term is thrown around so often (especially during On-Campus Interviews) that it’s almost assumed everyone knows what it means. For the majority of law students, billable hours are an important concept to understand, especially as students weigh career options. Why? Most law students graduate law school and begin life as an attorney at a law firm where billable hours become an important aspect of day-to-day life.

What Are Billable Hours And How Do They Work?

What Are Billable Hours?

Put simply, billable hours are the hours of time an attorney dedicates to handling client matters. The time an attorney dedicates to certain legal issues for any particular client is paid for by the client. The attorney’s hourly rate (the amount charged to the client for each hour worked) is reflected on the client’s legal bill. The hourly rate is multiplied by the amount of attorney time dedicated to a client, which equals the client’s total fee for legal services.

Now, the term “billable hours” can be somewhat deceptive because it implies that only entire hours are eligible for payment. In fact, attorneys often bill time to clients in 1/10 of an hour (or 6-minute) segments.  You might hear attorneys mention they “billed a client .3” or that something “shouldn’t be billed more than .2.” This is referring to portions of an hour spent attending to a client’s legal issues. For example, if you spent roughly 18 minutes on a task, you would bill the client .3. If you spent half an hour on a task, you would bill the client .5.

So, how does this way of keeping track time fit in with an attorney’s hourly rate? If an attorney charges $200.00 per hour and spends .3 of one hour drafting a letter: $200.00 x .3 = $60.00. That means the client pays $60.00 for every 18 minutes of work an attorney completes for that client.

Why Are Billable Hours So Important?

Billable hours are important for one simple reason: it’s the primary way law firms generate income. This is generally why almost every law firm mandates billable hour requirements or has a billable hour target for each of its attorneys. Depending on a firm’s billable hour requirement, an attorney’s compensation, work/life balance, and career opportunities will vary. So, if you’ve been walking around campus and heard that a firm “has crazy billable hour requirements” – now you know. Each law firm structures billable hour requirements differ depending on that law firm’s priorities.

Does Unbillable Time Exist?

The short answer is yes! However, unbillable time can be one of the most difficult things to balance as an attorney.  For example, if you spend a half-hour interviewing a potential associate attorney, that time is likely not billable, meaning that you might have to make up for that time in order to reach your annual billable hour target. Likewise, if an attorney spends more time than is reasonable on a task, the excess time could be “written off.” Write-offs are generally authorized by partners of a law firm to avoid seeming unreasonable to clients. Depending on the law firm, “write-offs” might not count toward an attorney’s billable hour requirement because the client is ultimately not paying for that time worked. It’s important to understand how your employer calculates billable hours so you know how others working at the firm view your time!

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