Despite constant predictions of its demise, the billable hour remains firmly entrenched in legal practice, especially among solo and small firms. But according to the latest Legal Trends for Solo and Small Law Firms report by Clio, the rise of generative AI is creating real pressure to rethink time-based billing.
Flat fees are gaining traction — with three-quarters of solo lawyers and nearly two-thirds of small firms offering them in some capacity — but hourly billing still dominates. Why? It’s familiar, straightforward, and provides a sense of financial security, particularly for smaller practices managing cash flow.
However, clients are pushing for change. Over half prefer predictable pricing models like flat fees or subscriptions — the same way they pay for other services. And with in-house legal teams under budget pressure, consistency in billing is more appealing than ever.
AI may be the real catalyst for this long-anticipated shift. As tools begin to automate high-volume tasks (think research, drafting, and document review), the billable time attached to those jobs starts to disappear. Clio’s data suggests this could put up to $27,000 in annual revenue per lawyer at risk for firms relying strictly on hourly billing.
That’s a serious hit — especially for smaller firms. It raises the question: how do you get paid when the time you used to bill for is now handled in seconds by AI?
The answer isn’t necessarily charging sky-high hourly rates. Instead, firms may need to embrace flat fees, project pricing, or subscription models that reflect value delivered rather than time spent. This doesn’t mean abandoning time tracking — it will still be essential for estimating costs and setting flat rates. But it marks a shift in how firms monetise their work.
Previous legal tech revolutions promised efficiency, but often just created new types of work. Generative AI is different: it replaces parts of the job entirely. If lawyers don’t adapt their billing structures accordingly, they risk losing real money as their traditional revenue base shrinks.
The billable hour isn’t dead — but it’s increasingly incompatible with a tech-driven future. Firms that start experimenting with alternative fee models now will be better positioned to thrive as the profession evolves.
Source: Above the Law
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