Are you thinking of hiring a freelance lawyer to assist with your overflow legal work? Not sure if the rate they have quoted is reasonable?
Here are three important considerations to keep in mind when reviewing a freelance lawyer’s hourly rate:
Freelance Lawyer ≠ Full Time Associate
“$200/hr? But, if that person worked full time, their salary would be $416,000.00! I’m not paying that for a freelance lawyer.”
We’ve heard this comment a few times from lawyers inquiring about our freelance lawyer services. While it might be tempting to make a direct comparison between a freelance lawyer’s rate and a full time associate’s salary, this is really a false equivalence. It is like comparing apples and oranges.
Remember, if you hired a full time associate for your law firm, you would also have to pay the following: employer portion of Employment Insurance and Canada Pension Plan, vacation pay, withholding taxes, law society fees, professional insurance (LawPro) fees, health benefits, legal association fees (e.g. Canadian Bar Association), CPD course fees, potential yearly bonuses, and costly overhead expenses including a computer, phone, software or other legal subscription fees, wifi, office space and furniture, an assistant, etc. Further, the firm would also be responsible for any potential severance or termination pay.
When hiring a freelance lawyer, it is the freelance lawyer, not you, the hiring lawyer, who pays for all of the above additional costs and fees.
Freelance lawyers also provide law firms with valuable financial flexibility. As independent contractors they provide help only when needed and are paid only for the hours that they work. With a full time associate, their paycheque is due and payable every two weeks, even if the firm is having a slow month and the associate is not working or billing full-time hours.
If you do not need full time help you can avoid the responsibility of paying expensive overhead costs by engaging the use of freelance lawyers.
Hiring Freelance Lawyers = Clear Direct Profits
Generally, a freelance lawyer will charge a rate that is below market value or below the hiring lawyer’s rate. This way, the hiring lawyer can see a direct profit from the freelance lawyer’s work by marking up the freelancer’s hourly rate to the end client.
For example, if a freelance lawyer is charging $200/hr and the hiring lawyer charges their work out to the end client at $275/hr, the firm is making a direct profit of $75/hr without the additional costs/expenses discussed above. For more information on marking-up your freelancers’ fees to clients, click here.
Freelance Lawyers’ Rates are Flexible, Full Time Associates’ Salaries are Not
When you hire an associate and agree to a set annual salary you are now committed to paying that amount. As freelance lawyers usually work on a per project basis, the hourly rate may be negotiated anew with each project.
For example, you may pay the freelance lawyer $200/hr for one project, but the next file that you need help with is a legal aid file or the client has a fixed budget. If the freelance lawyer enjoys the work or if there is a guarantee of a set volume of work, the freelance lawyer may agree to a lower price for that particular project. A full time associate will likely not agree to a cut in pay in the same situation.
The legal industry is changing and outsourcing legal work to a freelance lawyer is becoming increasingly common and even recommended. With this comes new possibilities but also new questions about how to use a freelance lawyer and, of course, how much to pay them. At Flex Legal, we understand that you need to stay profitable and you may also need additional help. Luckily, we can help with both! If you cannot afford to hire a full-time associate but have busy periods you cannot handle alone, then a freelancer lawyer might be the right decision for you. Get in touch for a free quote today.