Artificial intelligence is testing the long-standing dominance of hourly billing in legal services. In a Legal Futures column, Glenn Rhea argued that AI-driven efficiency is exposing the mismatch between time-based charging and the outcomes clients now seek. Technologies that can reduce hours of routine work to minutes make hourly rates harder to justify, prompting firms to trial flat fees, subscriptions and other value-based arrangements.
The economic impact is clear. Industry research shows AI can automate large swathes of traditional hourly tasks — from document review to legal research — that underpin the economics of time billing. The Thomson Reuters Institute sees this as a chance to move toward value-based pricing, provided firms build client trust, maintain quality and embed robust human oversight.
Clio’s Legal Trends data shows most routine hourly work could be automated, that firms using AI are more likely to offer flat fees, and that such matters are billed and collected faster — with most clients preferring predictable pricing. Wolters Kluwer’s Future Ready Lawyer survey reports that many corporate legal teams and firms expect generative AI to affect the billable hour, but cultural and structural inertia remain.
Transition will require more than technology. Firms must design offers around outcomes, adopt capped fees, subscriptions and success-based arrangements, and retain time-tracking to ensure sustainability. The American Bar Association has long promoted AFAs for their predictability and alignment of incentives, noting they can also improve lawyer wellbeing by easing pressure to log excessive hours.
Responsible deployment is essential. Thomson Reuters stresses explainability, audit trails and mandatory human review, while recent Reuters reporting highlights disciplinary risks where practitioners failed to verify AI-generated content. Wolters Kluwer notes that firms may outsource automation to alternative legal service providers and retrain staff for higher-value, client-facing work.
For UK firms, the opportunity is to lead in combining AI and new pricing models. Practical steps include piloting AFAs on selected matter types, separating automatable from judgement-heavy tasks, and creating disclosure and verification protocols for AI outputs. Regulators and bar bodies can support with clear guidance on responsible AI use and consistent standards for verification.
The case for change is both commercial and ethical. Value-based pricing can make costs more predictable, align incentives between client and counsel, and allow lawyers to focus on strategy, negotiation and complex problem-solving. Challenges include cultural resistance, retraining needs, and integrating pricing with AI-driven workflows.
Done well, this could reset the competitive landscape, combining AI-driven productivity with human judgement and transparent, outcome-based pricing. Firms that move quickly and carefully have the chance to redefine legal value — and make the UK a model for responsible innovation in law.
Created by Amplify: AI-augmented, human-curated content.
