A Guide to Paralegal Billing

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Delegating some routine law firm tasks to a qualified paralegal goes a long way towards improving productivity, enhancing client-service capabilities, and bringing balance to a supervising lawyer’s workload. But paralegals can also boost law firm profitability. By making use of paralegal billing opportunities, paralegals can also improve law firm profitability. At the same time, law firms can pass on cost savings to clients.

In this blog post, we’ll cover what legal professionals need to know about paralegal billing. We’ll also include what paralegals can bill for, the basics of paralegal hourly billing rates, and best practices for law firms to consider. Read on to learn more about how properly integrating paralegal billing can benefit your law firm.

With this in mind, paralegals could potentially bill for certain tasks (which a lawyer would otherwise have to complete), which could include:

Conversely, administrative or clerical tasks that a paralegal completes (like filing or making copies) are considered non-billable.

ABA Model Guidelines for the Utilization of Paralegals outlines the general guidance above. In Guideline 8, the ABA states that a “lawyer may include a charge for the work performed by a paralegal in setting a charge and/or billing for legal services.” 

However, law firms and supervising attorneys need to check with and refer to their jurisdiction and local state bar rules to determine what paralegals can bill for. For example, the ABA Guidelines also note that—in certain jurisdictions—courts have specific requirements for the type of billable paralegal work. 

a calculator

Paralegals billing hourly must know how to log portions of hours worked accurately. To quickly track and calculate hours without cutting yourself short or padding your time, lawyers (and paralegals) bill in standard time increments. Most lawyers bill by 1/10th of an hour (or six-minute) increments. 

Of course, not all law firms use billable hours exclusively or at all. Firms that price their legal services using an alternative billing structure may consider their paralegal’s work time when setting those fees. These alternative fee arrangements include fixed or flat fees, contingency arrangements, retainer, sliding scale, or subscriptions. 

However, law firms need to know that most state guidelines prohibit paralegals from setting fees.

Learn more about common billing increments and tools to calculate them

What is the average paralegal hourly rate in 2021?

Paralegals are not lawyers. But experienced and qualified paralegals can complete substantive legal work on behalf of a supervising attorney at a much lower cost. The average paralegal hourly rates are lower than lawyers’ hourly rates. But how much lower?

Lawyers calculate hourly rates based on several factors. As noted in Guideline 8 of the ABA Model Guidelines for the Utilization of Paralegals, lawyers are permitted to charge “market rates” for paralegal services instead of actual costs. 

With this in mind, lawyers should set their paralegals’ hourly billing rates reasonably. Lawyers should also consider factors like:

  • A paralegal’s experience. A highly trained paralegal with many years of experience can complete a legal task more efficiently than a brand-new paralegal, so the rate should reflect that.
  • The market rates for paralegal billing in the firm’s geographical location.
  • The lawyer’s rate. Paralegal services are typically more cost-effective to the client.

Paralegal hourly billing rate vs. what a paralegal earns per hour

Note that the paralegal hourly billing rate is based on the above factors and is not the same as what a paralegal earns in an hour. However, lawyers can use the average paralegal hourly rate as a point of reference

As with any role at a law firm, the amount a paralegal earns varies based on factors like experience, skill level, and firm location. However, the average paralegal hourly rate of pay for a paralegal in the United States is $21.97. This range is similar to the $25.44 per hour 2020 median hourly pay for paralegals and legal assistants presented by the U.S. Bureau of Labor Statistics.

paralegal billing clients

Paralegal billing tips and best practices

Law firms usually do their best to ensure that their overall law firm billing process is efficient and accurate. Similarly, firm staff also consider the ethical and procedural best practices of paralegal billing. Keep the following paralegal billing tips in mind:

Consider the ethics and standards of paralegal billing

Paralegals work under the supervision of attorneys, so paralegal billing should abide by the same accuracy, clarity, and professionalism standards. For example, Rule 1.5 of the ABA Model Rules of Professional Conduct lays out what to consider for setting reasonable fees for lawyers. Lawyers should also keep the same factors in mind when setting paralegal billing fees. 

Law firms also need to differentiate between billable and non-billable paralegal work. Paralegals wear many hats and play numerous critical roles at a law firm. But only substantive legal work that a lawyer would otherwise complete should be billed. Billable paralegal work must also meet the guidelines for billable paralegal work in your area.

Be specific and detailed

Clarity, consistency, and communication are key to effective law firm billing. So it’s best practice for specific and detailed paralegal billing that’s easy for clients to understand. Clients should know when a paralegal completed legal work and precisely what they did. For example, when billing on an hourly basis, paralegals should provide detailed notes for legal work performed on invoices.

Bill promptly

Sending clear, accurate bills promptly and consistently to clients is vital for ensuring healthy law firm collections. But billing promptly is also an excellent way to minimize confusion when it comes to paralegal billing. The longer a firm waits to send a client bill, the more challenging it is for the client to recall what legal services they received. A late bill could result in clients getting confused over their invoices. As previously mentioned, clear notes can help ensure a smooth experience for clients. Billing promptly also makes it easier for clients to read bills. 

Use cloud-based legal billing technology

As Doug Bend of Bend Law Group explains, the right tools and systems can make billing easier and more effective for the whole firm. When multiple people—lawyers and paralegals—are billing, having cloud-based legal technology creates standardized, automated systems that allow everyone to create accurate invoices for clients. 

Clio Manage’s legal billing software lets firms quickly and easily create bills for clients from anywhere. Clio’s legal billing software also contains numerous features that can help paralegals and lawyers bill more efficiently. Here are a few examples of how Clio can help a firm’s billing:

  • Custom rates. Custom hourly rates and fees lets you charge clients different hourly rates and flat fees. This way, it’s easy for you to bill clients at different rates depending on who completes the work.
  • Easy-to-read invoices. When you’re billing for lawyer and paralegal legal work, clear invoices are crucial for clients. Clio helps firms create professional invoices that can include aggregated or expanded activity lists and detailed statements of accounts.
  • Time tracking. Clio Manage’s legal time and expense tracking features let users record their time worked via a time tracker. You can also add time entries directly from things like calendar events, communication logs, or documents.

Seamless paralegal billing makes a difference

Hiring a paralegal can bring numerous benefits to a law firm’s productivity and efficiency.  By knowing what legal tasks paralegals can bill, law firms have more opportunities to increase their law firm profits. Because paralegals can complete certain substantive legal tasks for lawyers at a lower billable hourly rate, delegating billable work to paralegals lets firms lower costs for clients while freeing up more lawyer time.

While there are many advantages to paralegal billing, it’s always important to know the rules for what a paralegal can and cannot bill for in your jurisdiction. If you learn and abide by those rules, paralegals can be a cost-effective way to serve legal clients better. 

Categorized in: Accounting, Business

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