Flat Fee v. Hourly Retainer
For many, contact with our office is the first time they have needed to retain counsel. Often in the discussion on compensation, questions arise around flat fee agreements and hourly retainer agreements. Either way, a client will sign a “retainer agreement,” but under the flat fee arrangement, they would not pay a retainer, but a fee. While many fields of law are very suitable to a flat fee agreement, others are done on a retainer or hourly rate agreement. To make this a little more clear, here are some examples of both the flat fee structure and the retainer, or hourly rate structure.
In a flat fee agreement, some specific task or objective for the attorney to complete is set out in the retainer agreement and an agreed upon amount of money, to be paid by the client, is also memorialized. A criminal case will often be a flat fee arrangement. This is because there is a finite amount of work that may come up in a case, therefore an attorney can gauge the amount of time preparing the necessary paperwork and attending the requisite hearings will take. Often times, a criminal defense attorney will represent a client based on a flat fee arrangement up to and through the final pre-trial hearing. This is in hopes the case will be resolved and that trial will not be necessary. Preparation for a full trial can require an enormous amount of time, and therefore, to keep the flat fee low on the front end, they will exclude that from the initial contracted services.
If the criminal case settles before trial, the client has not overpaid and the attorney has not undercut the value of his services. If the attorney were to include the price of trial in a flat fee arrangement, and then the matter not go to trial, the client may overpay for the services rendered.
Hiring an attorney to help defend you for a DUI, domestic violence, drug crime, or assault would be a good scenario for a flat fee. The criminal arena does not have a monopoly however on flat fee retainers, estate planning, such as wills and trusts, matters of probate, and bankruptcy also are often practiced under flat fee agreements.
Now consider the hourly approach. In this case, the client pays the attorney or the firm a retainer. In this case, the retainer is a specified amount of money which the attorney has not earned, however, the client gives the money to the attorney to be kept in trust. At this point, it is not the attorney’s money, rather, it is held in a trust account which the attorney will bill against for work done at the attorney’s hourly rate.
Most attorneys will have a minimum billable. This means they will charge at least a specified fraction of an hour regardless of the time spent. For example, if an attorney has a one-tenth of an hour minimum billable, that means the attorney would charge one-tenth of an hour (.1 or six minutes) for any work done, even though the e-mail or phone call only took four minutes. Minimum billables can range from the low end of .1 and go up from there, so be sure to ask the counsel you are considering what their minimum billable hour is.
The retainer is designed to be a way for the lawyer to make sure that clients are serious about moving forward. It’s a way for the lawyer to deal with a legitimate problem–clients who ask the lawyer to do work on their behalf, but don’t pay for the lawyer’s work once the work is done. For this reason many firms will not allow its attorneys to work on matters which have gone over their retainers, this is when replenishing your trust is crucial to keep your case moving forward.
Hourly retainers are a good option in cases where a time frame for resolution is unpredictable. It would be unfair to the attorney to receive a small flat fee and face what appeared to be a simple divorce which became a legal disaster. Similarly, it would be unfair for a client to pay an enormous flat fee for a case that finds quick resolution.
Setting clear expectations regarding fees and retainers is a sign of professionalism. Ensure that you are clear on what your commitments are and what services are included as you consider potential lawyers to help you with your case.
Schmidt Law Firm Law Firm
136 East South Temple Street #1500
Salt Lake City, UT 84111