The billable hour in FY25–26: A ‘reimagining of how value is defined, delivered, and rewarded’

This is despite many practitioners maintaining that time-based billing “is still an important option” – although, earlier this year, heads of legal said that with the rise of emerging technology and its increased uptake in the profession, it’s “natural to expect” that costs for legal services will begin to be impacted.

Research late last year also showed that alternative pricing arrangements, such as fixed fees, are gaining popularity in the profession – with 56 per cent of firms offering them in 2024 (up from 45 per cent two years ago).

Speaking to Lawyers Weekly, Clio APAC general manager Denise Farmer also cited research revealing that “87 per cent of top Australian firms now offer clients a choice in billing, including fixed or task-based fees”.

“As FY26 fast approaches, the Australian legal sector is moving further away from traditional billing structures and towards more flexible and transparent pricing models. This shift is largely driven by advancements in technology, including AI and evolving client expectations,” she said.

“The traditional billable hour is no longer a good measure of legal work, and clinging to hourly billing often creates more friction than trust. While some larger firms are sticking to billable hours, tied to performance structures and targets, the most agile legal firms are building a broader, more client-aligned pricing toolkit from flat and fixed fees to value-based pricing models.”

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From a BigLaw perspective, Lander & Rogers chief executive partner Daniel Proietto said that while the billable hour “remains a core metric in today’s legal market”, clients are expecting increasing transparency in the current market.

“Internally, [the billable hour] continues to play an important role in how we measure performance, manage costs, and build pricing models. Externally, clients – particularly those involved in complex litigation or regulatory matters still look to time-based billing as a key reference point for evaluating the cost of legal services,” he said.

“At Lander & Rogers, our focus is on delivering value, not just time. That means working with clients to agree on the most appropriate billing model for the matter at hand. The right pricing approach depends on multiple factors: the practice area, the urgency of the work, its complexity, and commercial sensitivity. Clients rightly expect transparency and commercial alignment, and we support that.”

In May this year, Lawyers Weekly revealed that lawyers across all seniority levels within BigLaw firm HWL Ebsworth would be expected to deliver an average increase of 1.15 daily budgeted billable hours from 1 July 2025 to allow the firm to align itself “more closely” with “growing sophistication and value” of its services.

Consultants and special counsel had an increase of 0.75 to 6.25 billable hours a day, senior associates moved 0.50 hours to 6.50, and associates will transition from six hours to 6.75.

Under these changes, chief executive officer Kris Hopkins said HWLE will be able to provide salary increases “above the industry average”, in addition to the “significant uplift” in bonuses paid across the firm.

This, however, came after former HWLE managing partner Juan Martinez told The Australian Financial Review back in 2018 that the firm had capped its billable hours for partners at five hours so they would not be “chained to their desks for hours on end”.

That same year, former G+T managing partner Danny Gilbert told Lawyers Weekly that “clients typically don’t want” movement away from billables, as the model allows them to retain more control.

However, Brisbane Family Law Centre director Clarissa Rayward argued that although clients still want to feel in control of their matter, they also want to understand what to expect, access support with ease and work with people they trust. There are “so many smarter alternatives to the billable hour” that meet these needs, including fixed fees, staged/project pricing, retainers, or a hybrid model, she said.

As such, alternative pricing models, according to Rayward, can not only benefit clients but also support the wellbeing of legal professionals and drive more sustainable practice.

“A pricing model that supports sustainable practice is a strategic advantage, not a risk. It’s also OK to say no to pricing pressure. Undercutting fees might win short-term work, but often at the cost of your team, your service, and your sustainability. Clients don’t need cheaper – they need certainty, value, and care.

“While the billable hour may still have a role for complex matters or internal metrics, tying salary increases to ever-rising hourly targets is increasingly out of step with the profession’s evolution. It prioritises output over outcomes – and risks driving talented lawyers out of the work altogether.”

NewLaw firm Law Squared has never charged by the hour – and director Demetrio Zema said the firm “never will”.

“From day one, I’ve been convinced that the traditional time-based billing model doesn’t serve lawyers or clients. It rewards inefficiency, undermines trust, and contributes to reward individualist behaviours and creates a culture of burnout that’s become all too common across the profession,” he said.

“While many firms are still increasing billable hour targets to justify salary hikes and maintain profitability, we’ve taken a different path. Our exclusively fixed-fee model offers cost certainty, radical transparency and real alignment between cost and value – not time spent. It’s a model designed for outcomes, not inputs. It changes how we work, who we hire, and how we lead.”

In terms of making a fixed-fee model work for the firm, Zema agreed that “it’s OK and reasonable to push back on client pricing pressure when the value of your work is being undervalued”.

“Saying no to uneconomical work is the sign of a mature and sustainable legal business, and it also assures the client of your commitment to your fee model,” he added.

“Our team is not measured or managed by timesheets, and our clients are never surprised by an invoice. We scope work carefully, price based on the value and complexity, and deliver on what we say. There’s still room for flexibility, for example, staged-based pricing or milestone-based billing, where it adds clarity or supports project-based work. But the principle remains: the client always knows their cost exposure upfront without an arbitrary time-based metric associated.”

AI and the billable hour in FY25–26

Amid economic uncertainty, shifting client expectations, and a talent market still marked by retention challenges, law firms are re-evaluating the role of the billable hour – with the profession “undeniably shifting” when it comes to the billable hour.

“We’re seeing a growing appetite for fixed, capped, or hybrid fee arrangements, driven by client demand for certainty and efficiency, and accelerated by the increasing adoption of AI. These alternatives can deliver genuine value, especially in advisory, transactional, and repeatable work where scope is clearer,” Proietto added.

“As we move into FY26, we expect to see the billable hour continue to evolve – not disappear. It remains a useful metric, particularly in determining resourcing needs, salary structures, and investment decisions, even as we continue to innovate in how we price and deliver legal services.”

While the billable hour still offers multiple benefits for firms and clients alike, including simplicity and familiarity, as well as transparent tracking of the time and effort invested in any given matter, the rise of AI and its ability to automate many time-consuming tasks, such as legal research and document review (traditionally billed by the hour) has – and will likely continue to – raise “questions about how firms will balance efficiency with profitability”.

Some have also predicted that the rise of generative AI (GenAI) will mean that billables will “inevitably decline”, with one report from late last year suggesting that the billable hour may be incompatible with GenAI innovation.

As the profession continues to undergo a digital transformation, the billable hour is, according to Rayward, starting to feel “like a relic of a different era in law” moving into FY25–26.

“In FY26, the firms that thrive will be those who embrace flexible, thoughtful pricing strategies that deliver not just strong legal outcomes, but a client experience aligned with modern consumer values,” she said.

Moving away from billable hours also means firms can increase transparency and predictability of legal services by aligning their services more closely with outcomes.

This, Farmer said, is “increasingly important” for firms in the age of AI.

“The introduction of AI tools in legal services allows lawyers to spend more time on strategic, high-value work, meaning firms can deliver greater value in less time. AI is, therefore, levelling the playing field, making legal expertise more accessible and affordable for a broader range of Australians, exacerbating the disconnect between time-based billing and actual value provided,” she said.

“Adopting this client-centric approach to billing not only increases accessibility, with transparent and predictable pricing structures, clients can assess the cost of legal services up front, breaking down financial barriers, but it also improves cash flow for firms, as they are twice as likely to get paid faster than those billing traditionally. The future of a profitable, reliable practice lies in moving away from hours logged and instead rewarding efficiency, client satisfaction, and the real value delivered.”

However, for firms that have operated on traditional billing models for some time, this may be easier said than done.

The challenge for firms, Zema explained, is quoting on a fixed-fee basis, yet time record in parallel and then charging the client on the actual time spent on the matter rather than the fixed fee. This, he said, “undermines the notion of fixed fee billing”.

“Law Squared has never charged on a time basis; it has no means to do so without hourly rates and recording time. It, therefore, regularly is non-compliant with traditional tenders; however, we staunchly have a fee model that is free from ambiguity, and we are committed to this, for both our team and our clients,” he said.

“The legal profession (and clients) do not need higher billable rates or lawyer targets. The profession needs a reimagining of how value is defined, delivered, and rewarded and a better way to manage lawyers away from time-based or purely individual financial metrics. The behaviours we reward and recognise will ultimately lead to positive change across the profession.”