How to Price Legal Services: Fixed Fees vs Hourly Rates

How UK law firms should think about pricing; the trade-offs between fixed fees and hourly rates, when each works, and how to price legal work in a way that is profitable, transparent, and defensible.

Pricing is one of the most important decisions a law firm makes, and one of the least discussed. Most firms default to whatever pricing model they've always used; hourly rates for litigation, fixed fees for conveyancing, contingency for personal injury; without stopping to ask whether that model is actually the best fit for the work, the client, and the firm.

This guide covers the two main pricing models, the trade-offs, and how to choose the right approach for different types of work.

The two main models

Hourly rates

The traditional model. The firm charges a fixed rate per hour (or per six-minute unit), multiplied by the time spent on the matter. The rate varies by fee earner seniority; a partner might charge £350/hour, a solicitor £200/hour, a trainee £100/hour.

Advantages:

The firm is paid for all time spent; no risk of doing more work than the fee covers
The client pays for what they get; if the matter is simpler than expected, the client pays less
It's transparent; the client can see exactly what they're paying for, if time is recorded properly
It's flexible; if the scope changes, the fee adjusts automatically

Disadvantages:

The client has no certainty about the total cost; they're signing a blank cheque
The firm has no incentive to be efficient; more time means more money
It creates disputes; clients question whether the time was necessary
It rewards slow work; the firm that takes longer earns more, which is not the incentive you want

Fixed fees

The firm quotes a single price for the matter, regardless of how long it takes. This is the model most clients say they want; certainty about cost.

Advantages:

The client has certainty; they know the cost upfront
The firm has an incentive to be efficient; less time means more profit per hour
It's simple; no time sheets, no disputes about hours
It's what the SRA Transparency Rules encourage; clear pricing information

Disadvantages:

The firm bears the risk; if the matter takes longer than expected, the firm loses money
Scope creep is a problem; the client may expect more work for the same fee
It's hard to price accurately for complex or unpredictable work
It requires the firm to have a good understanding of its costs and matter management

Which model for which work

Work that suits fixed fees

Conveyancing; the process is well-defined, and most transactions follow a similar pattern. Fixed-fee conveyancing is now the industry standard.
Simple probate; straightforward estate administration with no disputes. The firm can quote a fixed fee based on the estate size.
Wills and LPAs; standard documents with a well-defined scope. Fixed fees are standard.
Company formation; routine, well-defined work
Trademark registration; a defined process with predictable steps
Uncontested divorces; straightforward administrative work

Work that suits hourly rates

Complex litigation; the scope is unpredictable, the other side's behaviour is unknown, and the matter may settle early or go to trial
Commercial disputes; the value and complexity vary significantly
Probate with disputes; contested estates, Inheritance Act claims, contested wills
Complex commercial transactions; M&A, joint ventures, large contracts
Judicial review; unpredictable scope and timeline

Work that suits a hybrid model

Many firms use a hybrid approach:

Fixed fee with hourly for extras; conveyancing at a fixed fee, with hourly rates for any additional work (e.g., a chain break, a lease extension negotiation)
Fixed fee for stages; litigation with a fixed fee for each stage (pleading, disclosure, trial preparation, trial)
Capped fee; hourly rates with a maximum cap, giving the client some certainty
Fixed fee with success premium; a base fixed fee plus a bonus if the matter is successful

The hybrid model is often the most practical; it gives the client certainty on the main body of work while protecting the firm if the matter becomes more complex.

How to price fixed fees profitably

The biggest risk with fixed fees is underpricing; quoting £1,500 for a conveyancing matter that takes 20 hours of fee earner time at £150/hour (£3,000 of cost).

To price fixed fees profitably:

1. Know your costs

Before you can price, you need to know what the work costs you. This means:

Track time on every matter; even fixed-fee matters. If you don't track time on fixed-fee work, you don't know whether you're profitable.
Calculate the cost per matter: fee earner hours × hourly cost rate (not chargeout rate; the cost rate is what the fee earner costs the firm, typically 30-40% of chargeout)
Add overheads: rent, IT, insurance, SRA fees, marketing; typically 40-50% of the cost

2. Build in margin

A fixed fee should include:

The estimated time cost
Disbursements (passed through to the client)
A margin for risk (if the matter is 80% likely to take 10 hours and 20% likely to take 15 hours, price for 12)
A margin for profit

3. Scope clearly

The most common fixed-fee problem is scope creep; the client expects additional work that wasn't in the original quote. The client care letter must set out clearly:

What is included in the fixed fee
What is not included
The hourly rate for any additional work outside the scope
How variations to the scope will be agreed and charged

4. Review regularly

Review your fixed-fee pricing quarterly:

Which matters were profitable? Which lost money?
Were the losses due to underpricing or scope creep?
Are there matter types where you consistently underprice?
Should certain work move from fixed fee to hourly?

How to price hourly rates defensibly

If you charge hourly rates, the price must be defensible; the client should be able to look at the bill and understand what they're paying for.

1. Give a realistic estimate

The SRA requires firms to give clients the best information about likely costs. A realistic estimate is not a guess; it's based on:

The firm's experience with similar matters
The known complexity of the matter
An honest assessment of what could go wrong

Update the estimate if the matter changes. A client who is told early that the matter is more complex than expected will accept a revised estimate. A client who discovers this on the final bill will not.

2. Record time accurately and contemporaneously

Time recorded at the end of the day or the end of the week is reconstructed time; and reconstruction always underestimates. Use contemporaneous time recording; log time as it's done, in six-minute units, with enough narrative that the client can understand what the time was spent on.

3. Bill regularly

Regular interim billing keeps the client informed and reduces the shock of a large final bill. It also tests the relationship; if a client is going to dispute the fees, better to find out at month 2 than at the end of the matter.

4. Be transparent about the rate

The client should know the rate (or rates) at the outset, from the client care letter. If the rate changes (e.g., a partner takes over from a trainee), the client should be told before the work is done, not after.

Where OrdoLux fits

OrdoLux is a matter-centric platform that supports both pricing models. Fixed-fee matters can be billed on completion with a single invoice. Hourly matters can be billed from time records with itemised narrative. Both can be paid via Stripe "Pay now" links and synced to Xero or QuickBooks.

OrdoLux also includes time recording from desktop, WhatsApp, and after every Cas AI exchange; so time is captured on both fixed-fee and hourly matters, giving the firm the data it needs to price accurately.

See all features or book a demo.