How Billable Hours Work

Legal time is recorded in fractions of an hour rather than in minutes. The most common increment is a tenth of an hour - six minutes - though quarter-hour increments are also used, particularly on smaller matters and in some jurisdictions.

Because every discrete task is rounded up to at least one increment, the increment size has a large effect on the total. Twenty short telephone calls in a day produce two hours at tenth-hour increments and five hours at quarter-hour increments, for the same actual work.

A working day contains a substantial amount of time that cannot be billed to any client: administration, business development, training, supervision, internal meetings and the general overhead of running a practice.

The proportion of worked time that is billable is the utilisation rate. It is almost never close to one hundred percent, and a target expressed in billable hours implicitly requires considerably more hours than that at the desk.

Recorded time is not always billed, and billed time is not always collected. Time can be written off in review, discounted in negotiation, capped by a fee arrangement, or simply not paid.

The realisation rate captures that. Two firms with identical recorded hours can have very different revenue purely because of what happens between recording and collection, and a rate quoted per hour says nothing about which of the two a firm is.

Time reconstructed at the end of a week is consistently lower than time recorded as it happens. The short tasks are the ones that disappear - the five-minute calls, the quick emails, the interruptions - and they are numerous.

Contemporaneous recording is also more defensible. A narrative written at the time describes what was actually done, which matters when an invoice is queried or when time is assessed by a court or a costs assessor.

A time entry reading "attention to file" tells a client nothing and invites a write-off. An entry describing the task, the purpose and the output is far more likely to survive review.

This is not presentation for its own sake. Vague narratives are one of the most common reasons time is reduced, and improving them is usually the cheapest available increase in realisation.

Fixed fees, capped fees, staged fees and contingency arrangements all exist partly because hourly billing aligns the firm and the client badly - the firm is paid more for taking longer.

None of them removes the need to record time. Fixed-fee work still needs time recorded to know whether the fee was profitable, and firms that stop recording on fixed-fee matters lose the ability to price the next one.