If you’re looking for a lawyer for an online defamation case or any other matter, one question may stand out among all the others: how does the lawyer get paid? Lawyers generally employ one of the following three pricing structures.
- Retainer (or “Hourly”) Fee,
- Flat Fee,
- Contingency Fee.
Each payment method has its own pros and cons, depending upon the specifics of your legal situation and your financial means. Continue reading to find out the differences between each, their pros and cons, and which fee might work best for you and your lawyer!
What is a Retainer Fee? How Does a Retainer Fee Work?
A retainer, one of the most common ways to pay a lawyer, is an advance payment made by clients as a down payment on future services to be rendered. The attorney will bill an hourly rate against this retainer.
Say your attorney has a retainer of $1,000. If the attorney’s hourly rate is $100 and he or she works five hours on the matter, then a $500 fee will be deducted from the retainer. That will leave $500 left in the retainer to be applied toward additional services.
After a retainer is exhausted, most attorneys will bill their services at an hourly rate or sometimes request an additional retainer.
Attorneys usually send invoices to clients to keep them informed of what work has been done on their behalf and how much of the retainer has been used.
Pros & Cons of Retainer Fees
|Placed in a separate account to ensure the payment is used appropriately||Does not guarantee an outcome|
|Gives clients a good idea of where their money is going||Legal matter may cost more than the original retainer|
|Refundable||Not a projected total cost|
|Can create an ongoing attorney-client relationship||Client may need to “replenish” the retainer if it becomes low or runs out|
Retainer Fee Pros
Each payment method has its pros and cons. Some pros of a retainer are that a retainer usually remains in a separate account, such as a trust account or an IOLTA account. That stands for Interest on Lawyer Trust Account. Putting the money in a separate account ensures that the payment isn’t used by the attorney for personal matters and only goes toward the services to be performed.
Only after the attorney has performed certain services and billed them to the retainer account is money transferred from the trust or IOLTA account to the lawyer’s operating account. So the attorney doesn’t get all of the money upfront; it has to actually be earned.
Another pro of a retainer is that it gives you a better idea of where your money is going. Invoices or statements will be sent to the client outlining what has been done on their matter and what it has cost them.
Also, portions of retainer can be refunded if services end up costing less than anticipated. So if the attorney anticipates that your matter is going to cost $5,000 and he or she is able to reach your goal for less than that, say $3,000, then you’re going to get that $2,000 refunded back to you. That’s because the attorney did not earn that money and resolved the matter in less time than anticipated.
Another pro of retainers is that the relationship between the attorney and the client is ongoing rather than ending once the matter is completed and the target hit. The legal counsel can be continual, as implied in the expression, “I have an attorney on retainer.” Having an attorney on retainer has several legal benefits, including:
- Certainty as to your legal representation,
- A firm’s familiarity with you and your business,
- Prevents your competitors from hiring them.
The retainer can be replenished and a variety of different services can be provided.
Retainer Fee Cons
One con of retainers is that they don’t guarantee an outcome. Just retaining an attorney doesn’t mean you’re going to get the outcome you want. Another con is the uncertainty of what your case will finally cost at the end of the day. The matter could end up costing considerably more than the original retainer.
So, it’s important to remember that the retainer is not a projected total cost. It’s just a down payment. Another con is that the attorney might ask you to replenish the retainer as it becomes low or runs out. So that could cost you another chunk of money. Depending on the remaining work, the retainer may vary in price.
What is a Flat Fee? Flat Fee Meaning
The next payment method is a flat fee, which is a fixed total fee for some defined legal task. The cost will not change no matter how much work is done. It’s an all-inclusive price. Flat fees are generally employed in situations where the legal work is predictable and routine.
At Minc Law, flat fees are only applicable for our guaranteed removals from cheater shaming, scam exposing, and complaints websites. If we don’t successfully remove the offensive content, you’ll get your money back.
Pros & Cons of Flat Fees
|Predictable||Potential to overpay|
|No hidden surprises||Case may take less time than anticipated|
|Does not fluctuate||Not suitable for litigation|
|Encourages attorney efficiency||Not suitable for complicated legal issues|
Flat Fee Pros
A flat fee is predictable. You know what the cost will be upfront; there are no hidden surprises. Regardless of the time it takes to resolve the case or whatever complications may arise, the fee does not go up or down.
Another pro of flat fees is that they encourage attorneys to work quickly and efficiently on your matter because they do not want to lose money. They don’t want to take more time than covered by the projected flat fee.
If their hourly rate is $100, and the legal team believes it’s going to take 10 hours to complete your matter, they may ask for a flat fee of $1,000. If it takes them 12, or 15, or 20 hours to complete your case, then they’ve lost money based on what their hourly rate is. For that reason, the flat fee will prod them to work quickly and efficiently.
Flat Fee Cons
On the con side of flat fees is the possibility that you may overpay. That means your matter may take less time to resolve than originally anticipated. And if the case is resolved faster than expected, with less labor on the part of the lawyer, you won’t get a refund under the flat fee structure.
If the case was originally projected to take 10 hours for a flat fee of $1,000, you won’t get a refund if it takes only five hours to complete. The lawyer keeps it all. That’s why flat fees aren’t suited for all legal matters. Normally, they are only used for relatively simple or routine matters—and not for litigation or complicated legal issues.
What is a Contingency Fee? How Does a Contingency Fee Work?
Finally, lawyers may employ a contingency fee structure when taking your case. In a contingency case, an attorney agrees to accept a fixed percentage of the recovery paid to the client in lieu of other payment.
There is no upfront cost when a matter is taken on contingency and the attorney only gets paid if the client receives an award. The fee is based on what is awarded to the client after a case or matter is complete or settled.
Pros & Cons of Contingency Fees
|No upfront fees||No win, no award|
|Negotiable||At least 1/3rd of the award is paid to attorney(s)|
|Attorneys only get paid if you do||Attorneys may be selective about which cases they accept|
|Encourages attorneys to work hard||Clients usually still have to pay filing fees, court costs, expert witness fees and out-of-pocket expenses incurred by the attorney|
Contingency Fee Agreement Pros
A benefit of paying on contingency is that you do not pay your attorney any upfront fees. In most cases, you just sign a contract and the attorney begins to work. So you don’t have to pay anything up front.
One of the most commonly asked questions about contingency fee agreements is if they are negotiable. Yes! Contingency fees can be negotiated. Typical contingency fees are usually one-third of any award received but there is room for bargaining.
Another pro would be that attorneys do not get paid unless you do. That serves to make attorneys work harder for clients because they’re not going to get any sort of compensation for their time if they do not obtain a positive outcome. Otherwise, they’re not going to get compensated at all for their time.
Contingency Fee Agreement Cons
Some cons of contingency fees is that they may end up costing more than a standard hourly fee. Typically, one-third of your award or settlement is owed back to the attorney. So you may lose quite a bit of your award to attorney fees and expenses, as well as any costs that are incurred along the way.
Also, attorneys are very selective about which cases they will accept on a contingency basis due to the risks involved. They only take on contingency matters that they feel very confident that they’re going to win an award on. If the attorney doesn’t believe you have a good or winnable case, they probably won’t accept the matter on a contingency basis because they aren’t going to be compensated for their time and efforts.
Another con is that if you lose the case or you do not receive an award, you usually still have to pay some of the expenses and costs that are incurred during the proceedings. This obviously doesn’t include the attorney’s fee but may include matters like filing fees, court costs, expert witness fees and out-of-pocket expenses of the attorney. Those are the kind of things you might have to reimburse the attorney for, though the exact terms of what you’re on the hook for would be spelled out in the contract.
Which Pricing Structure is Best For Your Situation?
Whichever fee structure you and your attorney choose, one way you can help keep costs under control is by being completely honest with the lawyer from the first consultation. The American Bar Association notes that the attorney is bound by confidentiality obligations and straightforward about all the facts will help the lawyer work more quickly and efficiently.
Another possible way to keep costs down is by negotiating a prompt payment discount with the attorney, providing a reduction of 5% or 10% in costs for rapid payment of invoices.
So, which pricing structure works best for your case? It always depends on the details, but there are three primary types of pricing structures we charge clients at Minc Law:
- Flat fees for guaranteed defamation removals,
- Hourly fees for litigation services,
- Hourly fees for non-litigation services.
We require retainers for all three. But, the amount will depend on the scope of the work. For example, a good rule of thumb is that an extra $1,000 will be requested as a retainer for each additional website or link you want removed.
Once again, every situation is unique, so it’s imperative you reach out to the experienced lawyers of Minc Law. You can contact us by calling us at (216) 373-7706 or by scheduling a meeting online to discuss your situation and how we can help.