Partner chargeout rates are too low - discuss

Should clients get used to paying more for a partner's time? It seems a bizarre idea in this market, but it sprung to mind recently while taking one of my periodic online bashings from readers angry that I encouraged their employing law firms to freeze salaries. The background is this: clients quite often resent the salaries paid to assistants, generally for two reasons. Firstly, during booms they have seen assistant salaries rise sharply at the same time as their own bills have risen, so they think they're footing the bill. Secondly, they reckon they are paying a lot of money for relatively inexperienced novices.

But is that logical? After all, partner remuneration also soared during those boom times and it is obviously a major component of the rates law firms charge. Clients do sometimes resent partner earnings as well, but the issue is less pressing to them because this cost isn't directly reflected in what they are paying. To put it another way - take the example of a high-end City law firm. You pay your junior associates around £60,000 a year basic, but you expect them to bill at least three times that sum on the basis of an hourly chargeout rate of £150-£180. An equity partner at the same firm would, on average, be earning more than 10 times that salary, but the chargeout rate is in the region of £500-£600. That's only three to four times the level of the rookie.

You could argue that law firms are subsiding partners through high rates for junior associates. Why not charge out the associate at £100-£120 an hour and the partner at £1,000? That way the bill would more accurately reflect the business cost of the partner and the value of their experience and honed judgement. Leverage means the client shouldn't pay more, but resources should be better allocated. Law firms always say partners are adding value - well, why not charge for it? Likewise, clients, instead of trying to get subsided partner time, might request a more considered use of resources deciding that, actually, their matter is fine with a junior or mid-level lawyer, if the saving is that significant.

It should also, in theory, encourage value-based billing as there would be less incentive to clock up endless hours. It might also even ease the in-built tension between partners and associates with regard to their relative value to the business (on second thoughts, I don't think anything can achieve that). There are probably a dozen good reasons why it wouldn't work, but at the moment they are eluding me. Maybe readers have a view.