Posted Nov 20, 2009 03:30 pm CST
Companies are trying to cut their legal budgets, and it’s affecting in-house lawyers whose salaries are frozen and outside law firms asked to reduce rates and offer alternatives to hourly rates.
Alternative fees have been touted as the up-and-coming way to reduce outside legal costs. But law departments are trying another tack as well, by freezing or even cutting the hourly rates paid to outside counsel, according to a survey by the Hildebrandt legal consulting firm.
Forty-six percent of law departments surveyed said they have cut their hourly rates paid to outside counsel, or will reduce their rates, according to a press release (PDF). And 64 percent said they have implemented or will implement rate freezes. That’s higher than the 55 percent that are using or plan to implement alternative fees.
Survey editor and director Lauren Chung tells the ABA Journal she was surprised at the percentage of law departments seeking cuts in their hourly fees. Has a price war broken out?
“I wouldn’t say it’s a price war,” Chung says. “I think everyone wants a discounted hourly rate. But that will only get you so far in terms of cost savings. In the end you’re going to have to look at alternative options.”
And that means taking another look at alternative fees, she says.
The survey also found the cost-cutting is reaching inside the legal department and affecting the lawyers and staffers who work there. Fifty-one percent of the companies have frozen salaries or plan to implement freezes for law department staff, including lawyers.
Others will get only minimal pay hikes, unlike years past, when the median increase in total cash compensation for lawyers was 6 percent to 8 percent, Chung says. Hildebrandt released average salary figures from the survey last month.
Corporate Counsel: “Ditching the Billable Hour: ‘Everyone Wants to Do It’ “
ABAJournal.com: “Law Firm Price Wars Break Out as Some Try ‘Loss Leader’ Bids for Work”
ABAJournal.com: “In-House Pay Hikes Tamped Down in Legal Cost-Cutting Efforts”