Contract attorney hourly rates vary from $20/ hour for entry-level work to $200+/ hour for specialized, expert-level work. Pricing factors to consider include practice area, experience, geography, the volume and consistency of work, whether remote work is permitted, and whether payment is rendered to an independent contractor or W-2 employee.
We’ll walk you through how to price contract attorney and paralegal hourly rates, the overhead and compliance costs to consider, and how to maximize ROI.
With contract attorneys becoming commonplace and 55% of law firms and 70% of law firms of >250 attorneys utilizing contract attorneys, “how much does it cost not to work with contract attorneys?” could be a better question than “how much does a contract attorney cost?
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With guidance from the ABA Standing Committee on Ethics and Professional Responsibility and the majority of jurisdictions allowing the reasonable markup of contract attorneys, in most states you can bill contract attorneys to your clients as you would bill an associate.
Beyond the profits from a contractor’s billable hours, there are a variety of less obvious profit opportunities and benefits to your operations budget, work culture, and the mental health of you and your team members.
To better understand why the ABA and other lawyers feel this is justified and why contract attorneys are not without their own overhead costs to your time and your practice.
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How can contract attorneys and paralegals help your law firm to grow, become more profitable, and become a better place to work?
Here are 4 common ways that law firms are strategically utilizing contract attorneys to fulfill objectives that support profitability, growth, and a better experience for clients and other law firm team members.
Lean focuses on the voice of the client and eliminating waste. In law, your product is your people and there can be both waste and a suboptimal experience for your clients if your talent capacity isn’t matched to your client and business needs.
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Contract attorneys and paralegals have become the industry-favored “just-in-time” talent strategy that helps to match costs to business cycles and the right talent specializations to demand.
Having a bench of contract attorneys with the right expertise as needed by your clients allows for better results and client experiences than employing full-time associates that are generalists or experienced in a different practice area. When your clients have more niche or specialized issues that require deeper expertise, generalists or associates with expertise elsewhere learn on the job—and bill your clients for their education.For example, paying a highly-skilled specialist $200/hour who can complete the job in 3 hours will ultimately cost less than someone learning on the job at $100/hr who will take 10+ hours to potentially produce a less desirable result.
Contract attorneys can also allow you to keep your billable rates competitive and better implement alternative fee arrangements while maintaining or increasing profitability since you don’t have to shoulder the financial burden of full-time payroll for underutilized associates or paralegals.
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Growth is a challenge and opportunity presented to firms ranging in size from solos to 100+ attorneys. As business picks up, particularly in uncertain times (hello 2020s), you may have too much work for yourself and/or your current team. Still, this may not warrant another full-time employee and salary. Or you may be concerned that even if you could justify this for the coming weeks or months, it may no longer make financial sense in the longer term if business slows down or a major case wraps up or settles suddenly.
In these situations, you’re likely hesitant to take on the risk and payroll burden of a new employee—and to hire someone away from another full-time job when you’re unsure that business and your firm’s finances can support an additional employee in the future. This is where contract attorneys and paralegals can shine, and likely why about 1/5 of legal payroll spend is now spent on contingent talent and 77% of in-house legal departments with 50+ lawyers, 70% of law firms with 250+ lawyers, and 55% of all law firms utilize contract attorneys.
A contract attorney or paralegal can allow you to meet your law firm or legal department’s growth where it is. You can expand the personnel hours that you pay for as your business grows to support them, rather than investing in a full-time hire before you have the consistent business and revenue to support them and their paycheck.
Cost Per Minute Calculator
Has your business ever picked up before you were able to make another hire? Did you respond by making yourself and your other team members work increasingly long hours? Did you and/or other team members get burnt out to the point that you ultimately became less productive or perhaps you lost a trusted employee to another job as a result?
Overworking yourself, associates, and paralegals versus committing to another full-time hire can be a logical reaction and can seem like the only solution to feast and famine cycles. These cycles are particularly stressful all around for law firm owners. During feast cycles, you and your team are run into the ground, during famine cycles firm owners may be up at night worrying about whether they can support themselves, their employees, and generally keep the lights on. Every extra person on payroll during a famine cycle ups the stress levels.
One of the most overlooked cost-saving opportunities with contract attorneys is sparing you and your team from the emotional and financial fallout of feast and famine cycles. Creating a work culture that doesn’t work your team into the ground can give smaller firms with smaller budgets an edge that attracts and retains top talent and in turn, helps you to attract and retain more clients.
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In addition to lost productivity, a culture of burnout puts you at a high risk of losing star employees. The cost here is not just the time it takes to replace your star associates—and the loss of their billable hours and yours as you replace them—but also the risk of having some of your clients follow them to their next firm. Further, the loss of a superstar can make daily work life at your firm more difficult for you and your team while you look for a replacement— and risk the loss of further crucial employees. And, a replacement that isn’t of the same caliber or worse can actively bring down morale.
The often unconsidered cost of a bad hire is staggering—which is a risk with any hire. According to The U.S. Department of Labor, the average cost of a bad hire is equal to 30% of their annual salary. Research in Organizational Behavior estimates the average time to replace a bad hire is 30 days and that bad hires result in an estimated 30-40% drop in team performance and morale. Further, high-performing employees are 54% more likely to leave when working with a toxic employee.
Avoiding the cost of a bad hire should be considered when using contract attorneys or paralegals for a temp to perm hiring strategy and determining the value of their hourly rate.
Hourly Rate Calculator
Contract attorneys can also be part of a permanent hiring strategy to help you test out and make the best hire when you are ready for a full-time hire—and avoid the cost of a bad hire. You’ll avoid making a permanent hire that kills your firm culture. The ability to quickly and easily cut ties if a relationship isn’t working out without the risk, liability, obligation and cultural fallout of firing a permanent employee is one of the benefits of the “date before you marry” arrangement that contract attorney relationships accommodate.
With this strategy, you’ll have insight into the work product and the knowledge of whether an attorney or paralegal who begins working with you as a contractor is a good fit; an insight you don’t have when hiring an employee in the traditional manner. And, you’ll also reap a return on your investment in hiring and onboarding a contract attorney with whom you’ve established a good working relationship since you won’t have to invest the time and energy into hiring and onboarding again. All of these reasons are likely why about 1/5 of Hire an Esquire’s contract lawyers and paralegals end up being converted to full-time employees.
In summary, utilizing contract attorneys and paralegals effectively can be a way to scale your law firm or legal department without the risk and financial stress of a full-time employee on your payroll. Contract attorneys can also help you to improve your client experience and attract new clients through better cost structures and arrangements. Strategically working with contract attorneys and paralegals can also help you to build a strong work culture that supports the mental health of you and your team—and creates a place where everyone is excited to work.
What's The Difference Between Contingency Vs. Hourly Fees?
Obviously, people are not widgets.We may consciously understand that finding talent and building healthy working relationships are not Amazon Prime experiences where a 2-minute time investment results in exactly what you need, delivered to your door the next day. Still, a big mistake we see is this unconscious expectation—and disappointment when hiring and having a successful working relationship with a contract attorney
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