The billable hour has been declared dead before. This time, the data backs it up.

A new survey of 543 UK legal professionals by LexisNexis shows 55% of lawyers now believe AI will change how firms bill, up from just 40% in January 2025.

Big firms and in-house teams are most convinced, both sitting at 62%. Expectations also vary by practice area:

That pressure is already showing up in how top Aussie firms price their work.

Ashurst Perkins Coie partner Hilary Goodier, speaking at Harvey’s Sydney Forum earlier this month, said the incentives have finally flipped.

“The reason the billable hour is for the first time genuinely under real challenge is, suddenly, it’s in law firms’ best interest to think about a different and better way of doing this.”

Some clients accept that pricing needs to cover the cost of building and running AI tools. Others want discounts.

We’re already seeing it on Wall St, with top investment banks pushing law firms to cut legal fees per transaction. Morgan Stanley’s Eric Grossman called the billable model “extraordinarily unstable.”

Ashurst is seeing the same dynamic play out in reverse. Goodier pointed to one matter for an investment bank, where using AI compressed six months of work into five weeks. The bank said that work allowed them to enter a market five months early. Rather than discounting for it, Ashurst added what basically amounted to a tip on top of the bill.

“The value of that to them was extraordinary. At the time it was a bit of finger in the air. We knew we had saved them about a million pounds, so we sat there and said, ‘How does it feel to you if we just add another 250 on to the bill?’ and they said ‘ah, that sounds about right’. And, that’s what we did.”

Mallesons Chief Innovation Officer Michelle Mahoney at the Harvey Forum called it, “a conversation and exchange rather than ‘here’s the magic number’.”

Evidently, nobody has nailed the pricing yet — we’ve got fingers in the air across the board. Though Goodier expects value-based pricing will become “far more sophisticated” over time.

Pricing is only half the story. If AI saves time, then billable-hour targets punish lawyers for using the AI tools firms have paid for.

Mallesons built a fix back in 2020. Mahoney says the thinking started with a simple insight: telling people a tool is more efficient doesn’t actually change behaviour. What changes behaviour is personal alignment.

The firm’s answer is what it calls the multiplier, an internal metric applied whenever lawyers use legal tech. Where the firm knows the legal tech saves time, lawyers can multiply what they log on their timesheet.

“So if you spend four hours on an activity, we’d credit your timesheet with six. This does not get charged to the client. It’s an internal metric.”

Whether this actually moves the needle when it comes to individual performance reviews is another question. Fee recovery still tends to be the metric that matters most when performance gets assessed.

Pricing and incentives aside, the bigger question is what this all means for the industry.

At the Harvey Forum, Telstra Deputy General Counsel Michael Griffith recalled calling a law firm partner at 10pm on Friday nights, and getting “two units of advice, insanely valuable advice”. That’s just one example where time spent doesn’t equate to the value delivered.

It’s part of why Griffith isn’t nostalgic about the billable model, calling it “not good for clients and in many cases not good for law firms.”

“I think the median cost of legal services is going to come down,” Griffith said.

There’s an economic theory behind that instinct. Jevons paradox holds that as the cost of producing one unit of something falls, demand for it can actually rise, leaving you doing more work than when you started. Griffith says the legal industry is already experiencing it.

“Either their legal bill will go down or [clients] are going to pay the same amount and they’re going to get more units of legal service or new lines of value… There is a lot of unmet demand for legal services.”