The billable hour refuses to die—we must learn to live with it
For well over a decade, legal commentators have predicted the imminent death of the billable hour. In fact, a simple online search reveals a portfolio of articles prophesising its demise dating back to the early 2000s. Yet here we are in 2025, and time-based billing remains the dominant operating system across Australian law firms.
The billable hour hasn't died; it's received a stay of execution. But the reprieve comes with conditions.
Why Value-Based Billing Never Took Hold
The promised land of value-based billing was supposed to rescue us from the tyranny of the six-minute increment. So why hasn't it arrived?
The answer lies in a fundamental challenge: determining value is difficult. Law firms struggle to price legal work with sufficient certainty to bear the risk of fixed arrangements. Without robust project scoping, historical data on matter types, and sophisticated resource planning, moving to value-based billing feels like stepping into the dark. Rather than invest in building these capabilities, many firms have defaulted back to what they know: billable hours with discounts.
The AI Disruption: A New Pressure Point
Generative AI undermines the value proposition of traditional time-based billing.
Here's the dilemma: firms invest significant capital in AI to deliver legal services more efficiently. They expect, and deserve, returns on those investments. But clients won't pay for the same number of hours when AI completes in minutes what previously took days. This creates an urgent need to decouple value delivered from time spent, or at least find ways to clearly show how you are charging for some tasks above hours worked.
The Case for Strategic Billable Hour Management
Since value-based billing remains aspirational and the billable hour persists as the dominant model, the answer isn't to wait for a revolution. It's to manage what we have with far greater sophistication.
Three principles must govern the billable hour going forward: transparency, accountability, and control.
True transparency means clients need to understand exactly who is doing what work, and why. In practice, that means specific work plans that outline deliverables, milestones, and resource allocation.
It begins with a better brief, one that captures not just the immediate legal question, but the broader business outcomes the client seeks. From this shared understanding, firms can develop resource plans that identify which tasks are necessary and who should perform them, ensuring the right people do the right work.
With flexible caps and scope control, sophisticated use of billable hours becomes powerful. Rather than abandoning time-based billing, firms can use scoping and budgeting to create flexible caps that associate value with specific tasks while still tracking time. But this only works with accountability and control: firms must commit to staying within agreed scope and seeking client approval before expanding it. When additional work emerges, it should trigger a conversation—not simply appear on the next invoice.
The Path Forward
In-house teams demanding fixed price billing will always pay extra for certainty. Firms clinging too tightly to the billable hour risk being left behind. But success in the next decade won't come from choosing between billable hours and value-based pricing. It will come from managing billable hours strategically—with transparency that builds trust, scoping that prevents waste, and accountability that ensures clients can control their investment.
For general counsel managing external spend and law firm partners seeking to build sustainable practices, the message is the same: the reprieve is temporary. Use it wisely.
Technology has a role to play. AllyOne helps in-house teams and law firms work together more effectively - even when the billable hour remains in play. Our platform empowers legal teams to build legal project budgets based on what they actually need — not what they might need. And with our world-first automated invoice review feature, you gain full accountability and control over spend.
Contact us to learn more about enhancing the value of your legal spend.