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LegalApril 15, 2022

The 2021 Real Rate Report uncovers current legal spend drivers

With each updated release, the Real Rate Report provides a view of not only the rates corporate legal departments have been paying for various types of legal work in various jurisdictions but also the drivers of those rates. The extraordinary amount of granular billing data in the LegalVIEW® Data Warehouse – more than $150 billion in legal spend – provides a clear picture of not only what the prevailing rates are but why they are what they are.

The Real Rate Report helps corporate legal departments control spend by providing detailed rate information for specific types of legal work performed by lawyers at various levels across the United States. In addition, the report allows ELM Solutions data scientists and analysts the opportunity to take a step back, view the bigger picture of the legal industry landscape, and make very data-grounded observations about how the legal market works.

Factors driving legal rates

The 2021 Real Rate Report, which has recently been released by ELM Solutions, identifies top drivers of hourly rates, including:

  • Attorney experience and reputation – High-profile lawyers and those with many years of experience generally charge a higher hourly rate. Depending on the specific case in question, this may present an opportunity for savings. If a case is likely to be straightforward, a less experienced lawyer may be an excellent choice. However, in high-stakes or complicated matters, absorbing the higher hourly cost may ultimately provide savings over a less experienced lawyer who will have to bill additional hours to come up to speed on this type of case.
  • Firm size – Larger firms tend to charge higher hourly rates. This has been a consistent driver of rates with each issue of the Real Rate Report. Where appropriate, clients can save on their outside counsel spend by choosing a smaller firm that has one to two associates and a paralegal.
  • Litigation complexity – Unsurprisingly, cases that are especially complex, with a large number of documents to review, many witnesses to depose, and numerous procedural steps, are likely to cost more regardless of other factors, such as the level of experience of the timekeeper attorneys.

An additional geographical influence

In addition to these established drivers of rates, ELM Solutions analysts also found geographic location to be a crucial factor in cost. As observed in previous years, lawyers in urban and major metropolitan areas tend to charge more than those in rural areas or small towns. However, another geographical driver has also become clear: There is a significant spike in hourly rates in areas of the country that are currently experiencing high population growth. For example, from 2020 to 2021, Fresno, CA, Greenville, SC, and Seattle, WA, all showed higher rate increases than average and also experienced much higher than average population growth in recent years.

It is not difficult to understand how this dynamic works in the legal market. When an area has an influx of population, as well as businesses, that area sees a corresponding spike in demand for legal services. The legal industry, however, creates some obstacles for attorneys who wish to move and practice in a new area. There is time and effort associated with becoming licensed in a new state and with establishing a new home and, potentially, office to work from. Lawyers who relocate also risk losing some or all of their existing clients who may want an attorney in the original jurisdiction, presenting another reason why moving to a new location may be a daunting prospect.

Given the complex set of factors that contribute to legal rates, it is imperative for corporate legal departments to have access to reliable benchmark data that helps them ensure they are not overpaying for legal services. For more on these and other rate drivers, as well as detailed rate information broken out by location, role, practice area, and more, download the 2021 Real Rate Report today.

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