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Law Firms Should Use The Calendar Year To Evaluate Billable Hours

One benefit of a calendar-year billable-hour cycle is that it takes advantage of the fact that many clients wait until the end of the year to pay their outstanding bills.

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year end calendar month last day planning plannerMost law firms have a billable-hour requirement under which attorneys need to bill a certain number of hours over a specific period, usually 12 months. Law firms have various periods over which they determine if attorneys satisfied the billable-hour requirement, and many shops judge attorneys from a period starting and ending before the holiday season. I have also heard of some firms assessing billable-hour expectations on a fiscal-year basis, and this 12-month period starts and ends in the summer. For a variety of reasons, it usually makes sense to evaluate attorneys based on the calendar year rather than any other period.

I am fortunate to have only worked at a law firm that assessed the billable hours of attorneys based on the calendar year. When I was starting at a firm, I welcomed this. My first day of work was in or around the middle of October, and it was reassuring to know that I had a few months during which I would not be assessed when it came to billable hours. During this time, I was freer to take on pro bono matters and was not too stressed about billing time since everyone knew that I would only start to be assessed in the new year.

After the new year, people naturally want to hustle and devote more time to work. Most people take time off to recharge during the holidays, and they are more energized after the new year to attack their work headfirst. This means that an attorney is more likely to begin the billing season strong and build a comfortable cushion of billable hours early during the period in which they are assessed.

Each year I worked at a law firm that had a calendar-year billable-hour cycle, I made sure to begin each year billing tons of hours. I let the new year energy naturally motivate my work, and I would set myself up with a solid cushion of billable hours after the first few months of the year. This was helpful to me when I planned the rest of my year. It was easier to take time off for vacation or personal reasons when I knew that I had banked billable hours and did not need to be at the grind as much to satisfy the billable-hour requirement.

Another benefit of a calendar-year billable-hour cycle is that this takes advantage of the fact that many clients wait until the end of the year to pay their outstanding bills. Some shops do not just assess attorneys based on the number of hours of time they bill. Rather, certain firms judge attorneys based on whether a client pays the bills associates with the hours billed by a lawyer. On the one hand, this practice is somewhat unfair since an associate often does not have control over whether a client pays their bills.

On the other hand, law firms likely need to keep track of budgets when making compensation decisions, and so firm collections are important. In any case, by waiting until the end of the calendar year, law firms maximize the chances that straggler clients will pay their bills, which would positively reflect on associates. Of course, not all law firms evaluate associates based on deeper billing metrics, but those shops that do should give associates the best chance possible to meet firm metrics.

One of the main reasons why law firms choose time periods other than the calendar year to assess billable hours is because they likely do not want to make bonus decisions around the holidays. Moreover, shops may not want attorneys to feel pressured into billing more hours around the holidays so that they can be eligible for a bonus.

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However, if law firms establish a certain threshold above the billable-hour requirement to receive a bonus, there will not be much assessment needed around the holidays to determine if an attorney will be receiving a bonus. Moreover, it is not too much of an imposition to receive a bonus paycheck or two after the holidays. Indeed, this was the practice at a law firm at which I once worked, and it was honestly nice to know that a bonus paid early in the new year would not appear on my taxes for the preceding year. Any downside of having a billable-hour cycle during the calendar year is outweighed by the benefits of assessing billable hours during this natural period.

All told, it is unfortunately too late for law firms to change how they evaluate billable hours this year since the new year is right around the corner. However, law firms should strongly consider evaluating the billable hours output of attorneys during the ordinary calendar year.

Rothman Larger HeadshotJordan Rothman is a partner of The Rothman Law Firm, a full-service New York and New Jersey law firm. He is also the founder of Student Debt Diaries, a website discussing how he paid off his student loans. You can reach Jordan through email at jordan@rothmanlawyer.com.

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