Elevate Your Rate Negotiations

Law Firm Rate Negotiations: FAQs and Resources

Rate negotiations can be one of the most time-consuming and stressful parts of working in legal operations.

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FAQs about alternative fee arrangements (AFAs)

How much do firms raise their rates each year?

Firms rate increase requests may vary from as low as 0% all the way to 20% or more, especially in the recent environment where inflation has been high

For example, in the first half of 2023, firms in the Am Law 200 raised their rates an average of 7.7%. Some went even higher, with 15% of the Am Law 200 raising rates by 10% to 20% overall.

How often should I negotiate rates with my firms?

Most in-house teams will negotiate rates with their most important firms either annually or every two or three years. For multi-year agreements, firms often request a fixed “annual increase” that happens each year within the agreement. 

We don’t recommend agreements beyond three years. Beyond three years, it is difficult to project how labor costs, market movements, or inflation rates will impact your agreements.

How long does the rate negotiations process usually take?

Rate negotiations typically take anywhere from a few weeks to a couple of months. Complex negotiations with dozens of lawyers involved can stretch out to six months of work or more. 

Does having a panel make rate negotiations easier?

Having a panel gives the in-house team an extra point of leverage it can use during the rate negotiations process. By offering a spot on a “preferred provider” list such as a panel, the in-house team is able to negotiate with multiple firms at the same time as they compete for a spot on the panel. Because of this competition and the expectation of additional work, firms are often willing to negotiate better rates. 

Panels also reduce the number of firms your team works with, reducing the administrative burden of managing so many relationships. 

What about so-called “unicorn” lawyers? Is it okay to pay high-value individuals more than the rates on the rate card?

While we recommend using a rate card to simplify negotiations and the management of a rate agreement over time, it is also true that there are so-called “unicorn” lawyers that are valuable enough to demand their own rate. It is perfectly acceptable to negotiate individual rates for these high-value individuals separate from your rate card.

What extras and freebies should I ask for during negotiations?

In the context of rate negotiations, many firms will be willing to offer extra value-adds such as:

  • Free legal advice (e.g. 100 helpline hours, 50 training hours, etc.)
  • Secondments
  • Market research
  • Additional discounts on certain types of work
  • CLE Trainings

One mistake we see in-house teams make is securing these freebies and extras and then not taking advantage of them. Firms actually want their clients to use the freebies they offer — as this gives the firm an opportunity to add more value to the client, which helps the firm earn more work from the business as their relationship grows.

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