How Do Lawyers Get Paid?

Attorneys spend countless hours on research, negotiations, and court hearings for the clients they represent. But how do lawyers get paid for the time invested in every case?

In most states, lawyers can set their own “reasonable” rates, which often reflect their experience and reputation, among other factors. Most attorneys also present their clients with an up-front fee agreement at the start of an attorney-client relationship.

What is a Fee Agreement?

No matter which payment structure they use, most attorneys present a contract – known as a fee agreement or representation agreement – clearly describing the following to their client:

  • What the attorney’s rate is
  • How the client will pay the attorney – and when
  • Total cost for any expenses over and above the hourly rate

Payment Arrangements

Attorneys typically use one of three fee arrangements with their clients. These fee arrangements include:

  • Fixed fees
  • Contingency fees
  • Hourly rates

Fixed Fees

Fixed fee agreements tend to be pretty cut and dry. Instead of figuring out billable hours, the attorney is working for the client on what works out to be a “flat-rate.”

Fixed fee agreements ignore billable hours and don’t change whatever the outcome of the case. For the most part, attorneys reserve fixed fee agreements for transactional services such as drafting a will.

Also, since a fixed fee ignores actual hours worked on the part of the attorney, it also happens to work out as one of the most affordable payment structures from the client perspective.

Contingency Fees

A contingency fee payment agreement is results-based. If your attorney doesn’t win your case, you don’t have to pay a dime. The pay-out, however, can be substantial.

How so?

One example would be a personal injury case between an individual and a large company. A contingency agreement would translate into one-third of the monetary damages awarded going to your attorney if they win your case. The attorney may even deduct incidentals such as travel, printing, and other related fees from the damages awarded. Once all expenses are accounted for, the rest is yours. Contingency arrangements typically aren’t allowed for divorce or criminal proceedings.

Hourly Rates

Attorneys also may charge an hourly rate to their clients for services. The hourly rate may vary and be task-specific. For example, a lawyer may charge one hourly rate for research necessary to a client’s case and a different hourly rate for appearing at a client’s plea hearing in court.

Retainers

Some lawyers require retainers from their clients.

What is a retainer?

A retainer is essentially an advance payment for services that will – or might be- performed. What does that mean exactly? The following two examples show how attorneys use retainer fees as part of their income:

  • An attorney may require a retainer of an individual client for whom the attorney is working at an hourly rate. The retainer will serve as an advance payment for, say, 40 hours worked in advance.
  • Sometimes, large companies or companies may keep an attorney or law firm “on retainer” in case a need for their legal services arises. In these instances, the attorney or law firm typically charges a substantial fee and agrees to make themselves available whenever and for as long as needed.

Incidentals

Clients whose lawyers are not working on a contingency basis may see fees on the final invoice described as “additional costs.”

Charges should be itemized. Incidentals for which you may pay include:

  • Court filing fees
  • Photocopies
  • Postage
  • Travel related to the case

Fee Resolution Programs

What happens if the bill you receive is inaccurate?

Clients who find themselves in a fee dispute situation should contact their state bar association for help. Clients may receive free arbitration aid in these cases.

Reduce Your Legal Fees

Lawyers are expensive, but it’s their knowledge and experience that clients depend on for legal representation. That doesn’t mean you can’t take a few steps to minimize your final cost.

Be organized. Arrive to your consultation with a list of questions, as well as all information or documents relating to the case. Be thorough but also efficient. Lawyers typically charge by the minute, so stay on topic. Inform your lawyer of any new developments to avoid surprises, and always examine your bill when presented to you.

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