More than half of Australia’s law firms have changed their pricing models because of the difficult economic climate, with an increasing uptake of alternative fee arrangements over billable hours, according to a report by legal tech company Litera.
Some 50% of firms have sought ways to cut costs; 46% have increased their fees; and 88% are using alternative fee arrangements for half or more of their work.
“With the death of the billable hour, firms have been considering different types of alternative fee arrangements, this includes flat fees, success-based or contingency fees, fee caps, portfolios, risk collars, and subscription-based plans for specific services, Stefan Steenveld, APAC Lead, Litera, said in written answers to questions.
The survey of 214 lawyers worldwide found that flat fees were the most highly used among Australian law firms with 86% of large firms and 73% of enterprise firms using this model. On the flip side, subscription-based plans were the least popular in Australia and across the U.K. and U.S.
He said alternative fee arrangements benefit clients and firms.
“For clients, this creates an opportunity to align on deliverables and, for law firms, they are able to set expectations to achieve the agreed-upon scope of work and it also prevents overservicing.”
The survey also found that 80% of Australian lawyers are planning to adopt AI-based solutions.
“Law firms are tapping into the power of generative AI and seeking ways to integrate such solutions into their business operations,” Steenveld said. He pointed to Litera’s Foundation Dragon, a generative AI deal term database that gives legal teams access to all relevant data points from unstructured deal data found in firm documents.
“With the help of Gen AI, lawyers are able to free up time spent on manual and mundane work and instead allocate more time to high-value work and better leverage their unique expertise to better manage resources and win more business and continue to build meaningful relationships with existing clients,” he said.
