AI Pushes Law Firms to Rethink Billing Models

As artificial intelligence continues to automate routine legal tasks, law firms are under growing pressure to replace the six-minute billing unit with pricing structures based on outcomes. This shift challenges deeply rooted traditions and internal metrics within many firms.

For decades, law firms have relied on time-based billing, often in six-minute increments, to charge clients by the hour. However, with the rapid adoption of AI tools that accelerate tasks such as legal research, document review and case analysis, clients are questioning whether time spent truly reflects value. Increasingly, they are calling for pricing that focuses on results rather than billable hours. This shift in expectations is encouraging firms to reconsider how they measure and monetise legal services.

Some firms, particularly innovative mid-tier ones like Keypoint Law, have already transitioned to fixed or value-based pricing. Nevertheless, most major firms continue to use time-based billing to assess internal performance. Survey data from the Australian Financial Review shows that these models still dominate, even as firm leaders recognise their shortcomings. In response, many large firms are beginning to test hybrid billing structures that combine hourly, capped or fixed-fee approaches in an effort to balance flexibility with financial control.

This transition goes beyond pricing. It is reshaping the way legal services are structured, delivered and assessed. Although the pace of change remains slow, firms that adopt AI-driven pricing models may gain a competitive advantage by better meeting client needs. Still, long-standing habits and internal resistance suggest that a complete shift will take time, especially in areas involving more complex or uncertain legal matters.

Source: Australian Financial Review, Thomson Reuters Institute, ISBA, Akerman