AI tips the scale — but the value of legal work still needs to hold its weight.

Billed for Hours, Done in Minutes: Will AI Break the Legal Fee Model?

31 Jul 2025 in

LegalTech

Henning Lorenzen

If speed is free, what exactly are clients paying for?

Generative AI is changing how legal work gets done. What once took four hours of focused legal analysis can now be produced — at least in part — by a language model in minutes. But while technology accelerates delivery, most law firms still charge by the hour. That creates a fundamental tension: Are clients paying for time, or for expertise?

AI Challenges the Billable Hour

The hourly billing model has long been criticized for rewarding inefficiency and penalizing innovation. With tools like ChatGPT, Harvey, or legal-specific AI copilots, lawyers can draft memos, structure contracts, or summarize caselaw at unprecedented speed. But if a task that used to be billed at 4 hours now takes 10 minutes — does the client get a discount? Or is the lawyer simply more effective?

What once took four hours of strategic case analysis now takes 20 minutes. Does that mean €1,200 becomes €100? Not exactly — but clients will want to know why not.

In reality, few firms are ready to align their pricing with machine-accelerated workflows. Yet clients are increasingly aware of the tools in play — and question the value of time-based billing when time is no longer the bottleneck.

Show Me the Numbers: How Much Time Can AI Really Save?

Benchmark studies from McKinsey, Thomson Reuters and Gartner show that generative AI can cut work time by 20–70 %, depending on the task:

Standard contract drafting: 40–70 % faster with template-aware copilots
Document review & risk flagging: up to 55 % reduction when AI handles first-pass analysis
Legal research & caselaw summarization: 30–50 % quicker using generative search tools
Due diligence data sweep: 25–40 % time savings in early deal phases

Figures vary by jurisdiction and oversight needs, but one takeaway is clear: time is no longer the primary constraint — credibility and insight are.

Value-Based Pricing: From Option to Imperative

For years, value-based pricing has been discussed in legal circles. AI may force its adoption. Instead of billing based on time spent, firms must articulate the value of legal work delivered — risk avoided, deals closed, rights protected. This shift:

✔ Rewards expertise over effort
✔ Encourages efficiency and transparency
✔ Aligns firm incentives with client outcomes

Ethical and Regulatory Considerations

Jurisdictions like the UK and EU are already exploring professional rules around AI use in legal services. Key concerns include:

Disclosure: Must lawyers tell clients when they use AI tools?
Quality assurance: Who is responsible for reviewing and validating AI-generated content?
Fee justification: Are clients entitled to know how long a task really took?

The ABA Model Rules and national bar associations increasingly stress “reasonable fees” in relation to effort and outcome — not blind reliance on time entries.

Toward a New Billing Logic

AI won't eliminate legal fees — but it will reshape how they’re justified. The future may lie in:

✔ Hybrid models: Time-based billing for human insight, fixed pricing for AI-supported tasks
✔ Outcome-based retainers: Paid for delivering a result, not a process
✔ Transparent itemization: Disclosing what was automated, and what required expert judgment

“AI reduces the time. Lawyers must defend the value.”

Conclusion

AI won’t replace lawyers — but it may replace the way they justify their fees. In a world where legal outputs can be produced in seconds, the real differentiator is human insight, strategic judgment, and responsibility. Billing models must catch up — not to devalue the profession, but to reflect its evolving form.

The clock is ticking — but not in billable hours.