How is an hourly rate determined
Hiring an attorney is overwhelming and stressful for a variety of reasons, whether it be the reason for needing legal services or just the cost of legal services. Most people, if asked, would likely anticipate hiring a lawyer to be expensive, but they still may not have an idea of how expensive it can be. Lawyers often have a dubious reputation when it comes to billing for their services. Even with this reputation for high priced services, sometimes hourly rates are still shocking to clients. With the high costs of legal services, most people think that the higher an attorney’s hourly rate, the better they are.
Abraham Lincoln is often credited with saying “A lawyer’s time and advice is his stock in trade.” In other words, lawyers are selling clients their time and advice. However, since it is up to each individual lawyer to determine just what their time and advice is worth, legal rates and fees can vary widely from attorney to attorney so it can be difficult for clients to understand what is reasonable and unreasonable. Making it even more difficult for clients is the fact that many attorneys do not advertise their fees. Without the ability to easily compare fees, clients are often left guessing as to what a reasonable fee is.
The common thought is that quality legal services can be incredibly expensive and that “you get what you pay for.” The insinuation behind that phrase is that if something is cheap in price, it’s of low quality. Conversely, it is also used to support higher prices for what is thought to be better goods and services. Of course, like with all consumer products and services, most people realize that it is not always the case, and sometimes quality goods and services are affordable while poor quality goods and services can be overpriced. The legal industry is no different. A high price tag doesn’t always mean a quality attorney, and a low price tag doesn’t automatically mean the attorney is lousy. However, due to the lack of transparency, it can be incredibly difficult for clients to distinguish the good from the bad and will revert to paying more because they mistakenly think they are getting a better product.
Fortunately, the State Bar of Michigan regularly conducts surveys of its members to gather billing and income data. After collecting the results of the survey, the State Bar publishes a report on the economics of law practice. The most recent survey is the 2017 Economics of Law Practice Attorney Income and Billing Rate Summary Report. https://www.michbar.org/file/pmrc/articles/0000153.pdf The data contained in this report breaks down attorney billing based on a variety of factors, such as years of practice, practice areas, office location, and others. While the Report is not perfect, not all attorneys responded to the survey, and the data is self-reported, it is nonetheless helpful for clients to see what factors can influence attorney rates. Rates are not all driven simply by experience and being a “good” attorney, but also affected by location and practice area.
Many factors can come into play for attorney when they are setting their rates. Years of experience, type of law practiced, and location are some of the primary factors used by attorneys to justify their rates. But what some clients may not consider, is that like any other good or service, lawyers need to market themselves and often will set their fees based not on these factors, but do charge higher rates because people will pay them thinking the high price tag means the attorney is great. It’s easy for clients to second guess an attorney’s experience and expertise if they have a low hourly rate. The natural inclination is that it is too good to be true. However, as the survey shows, there are different factors in play that can influence an attorney’s hourly rate.
Even if an attorney justifies their higher rate by having years of experience, that does not mean they are actually good at their job. Many people get away with being mediocre at their jobs for years, simply doing something for a number of years may make someone capable at their job, but not necessarily great. Not only years of experience, but also location. An attorney in a less populated area, or a lower income area, will generally charge less than an attorney in an affluent area. Sometimes, this difference in fees can be attributed to the simple fact that the attorney has higher office rent due to location and needs to charge more. Therefore, paying a higher price does not guarantee better legal services.
So if you are in need of legal services and find yourself in a position of interviewing lawyers to hire, while costs are important to consider in terms of what you can afford, they don’t mean much in the way of determining how good the attorney is. Hiring an attorney solely on the basis of price will never turn out well. It is important to look beyond just appearances and hourly rates to determine if an attorney really is the expert they claim to be. Do research beforehand and ask questions to see if the attorney actually knows their stuff. It’s easy to become enamored by flashy, overpriced lawyers, but the only thing worse than subpar legal services is overpaying for subpar legal services.