AI is transforming billable hours system.

With AI becoming more prominent, the enduring billable hours system is changing, and law firms are faced with a question on how to calculate their charges.

The billable hours system is losing ground

Historically, the billable hours system has been used in the legal sector to measure legal performance, set economic goals, and ensure fairness in pricing for unpredictable or complex cases.

However, unpredictable hourly billing often is misaligned with corporate objectives. Lubbock Fine, in a recent data report, recorded the average time for UK’s top 50 law firms to be paid by their clients to be over six months.

Law firms in London, are perhaps under the greatest pressure to increase their bottom line. As firms raise fees, they face growing pressure to justify costs to clients who increasingly expect faster delivery, greater transparency, and no corresponding increase in price for standardised work.

Accordingly, many law firms are exploring alternatives to the billable hour as AI accelerates process delivery and lowers the implied cost of routine work. Value-based pricing, including flat-fee arrangements, is therefore emerging steadily as a credible replacement.

LexisNexis’ survey data illustrates how quickly this shift is taking hold. In January 2025, 40% of lawyers said AI would influence billing. By August, that had risen to 47%, reaching 55% at general counsel level. The direction of travel is clear.

Pricing for value, not time, and the consequence for legal software adoption

Value-based models, such as flat fees or success-based pricing, naturally incentivise the adoption of software that improves efficiency. When used effectively, AI software can build trust, transparency, and convenience for clients, while also reducing administrative burdens within law firms. It can also lessen the time and friction involved in reviewing and approving bills against time records before invoices are issued.

AI is forcing a redefinition of how legal services are valued. Research by legal software company Clio found that 62% of UK firms anticipate an increase in AI usage over the next 12 months. Tools like LawForm will sit at the forefront of this shift, enabling faster turnaround as firms move from charging for time to pricing for outcomes and impact. LawForm supports this value-driven model by accelerating each stage of the legal process. As this develops, fixed and subscription-based pricing is likely to become more common, reflecting growing client demand for predictability and making AI an increasingly central part of how legal service is delivered.