Question: When does a 3-minute call from a divorce lawyer who charges $300 per hour cost MORE than the same call from a lawyer who charges $400/hr.?
Answer: When the $300/hr. lawyer charges in portions or “increments” of 2/10 of an hour, and the $400/hr. lawyer charges in 1/10 increments.
The great majority of divorce lawyers charge by the hour. Their hourly rates depend on factors such as experience, reputation, location, and perhaps how much they’re shelling out for their kids’ college education.
Clients consider hourly rates a key consideration in choosing a divorce lawyer, and rightly so. The problem is that hourly rates are usually misleading.
Based solely on their hourly rates in the example above, you would expect “Attorney 300” to charge you $15.00 for that 3-minute call, and “Attorney 400” to charge $20.00.
But they won’t.
Why? Because neither of those lawyers charge for the actual minutes spent. Instead, “Attorney 400” charges in increments of 1/10 (.1) of an hour (6 minutes), and “Attorney 300” uses increments of 2/10 (.2) of an hour (12 minutes).
What you see… and what you get
You know how the interest rate on your credit card isn’t what you actually pay? That’s because banks base interest charges on something other than your card’s overdue balance.
Most lawyers’ hourly rates aren’t what you actually pay either. That’s because lawyers base their charges on something other than the actual time they spend; namely, increments. And what makes incremental billing so expensive is that when lawyers bill in 6 or 12-minute increments, those increments become minimum charges. A lawyer using .1 increments charges a minimum of 6 minutes for anything she does on your case–even if it only takes 2 or 3 minutes. And a lawyer using .2 increments bills even more in extra fees–a minimum of 12 minutes!
Put anther way, clients pay more than their lawyer’s hourly rate every time a .1 increment lawyer spends less than 6 minutes on a task, or a .2 lawyer spends less than 12 minutes.
The “effective hourly rate:” a more accurate measure
Minimum charges are the reason that hourly rates are an inaccurate measure of how much a lawyer charges. And they can mislead folks who choose a divorce attorney based on her hourly rate.
A more accurate comparison of lawyers’ charges can be made using what I call the lawyer’s “effective hourly rate” (EHR). EHR is more accurate because it takes into account both a lawyer’s hourly rate and the increments in which she charges.
To illustrate how EHR works, let’s look again at that 3-minute phone call.
“Attorney 400,” who charges in .1 increments, will charge $40.00 for that call: $400 x .1 = $40.00 ($13.33 per minute).
But “Attorney 300,” who charges in .2 increments, will charge $60.00 for the same 3 minutes: $300 x .2 = $60.00 ($20.00/minute)!
To compare the two lawyers’ 3-minute EHRs, simply multiply their per-minute charges by the 60 minutes in an hour. That yields a 3-minute EHR (are you sitting down?) of $800/hr. for “Attorney 400” and $1,200/hr. for “Attorney 300.”
While your heartbeat returns to normal, remember that EHR applies only to tasks that take less than 6 minutes for .1 increment billers, and less than 12 minutes for .2 increment billers. EHR doesn’t apply, for example, to a half-hour meeting because it exceeds both 6 and 12-minute minimum charges. Thus, regular hourly rates accurately measure the cost of that meeting at $200.00 for Attorney 400 and $150.00 for Attorney 300.
Nevertheless, minimum charges add up. While they won’t make “Attorney 400” cheaper than “Attorney 300” over the course of a divorce, they can substantially narrow the difference between “Attorney 300” and a lawyer charging $350.00/hr. but using .1 increments.
Reducing the impact of incremental billing
You can’t eliminate the extra fees incremental billing generates. But you can reduce them.
Find out what increments a lawyer uses before you retain him. As our example shows, lawyers using 12-minute increments rack up substantially more in extra legal fees than those using 6-minute increments. And precious few of the .2 billers that I know hit enough home runs to be entitled to that big a bonus.
You can also control minimum charges by avoiding them whenever possible. Wait, for example, to call your lawyer until you have several topics to discuss, rather than just one. And don’t call your lawyer at all to check whether a hearing has been scheduled; contact a staffer instead.
If you’re considering retaining a 12-minute minimum lawyer, make sure the extra charges will be offset by a lower hourly rate or some other benefit such as special expertise your case requires.
In all events, use your understanding of incremental billing to save money in your divorce!
Learn more about saving money during divorce
in Larry Sarezky’s new book Divorce, Simply Stated
available in print and Kindle versions at amazon.com.
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