Law Firms: Hourly Billing Dominates Small, Midsize Firms

On October 22, 2026, new data released by the professional business platform 8am revealed that hourly billing continues to significantly dominate flat fee arrangements among small and midsize law firms, contrary to widespread industry predictions about the decline of the billable hour. The 8am SMB Law Billing and Payments Report, which analyzed billing and payment trends for the first half of 2026, found that 48% of these firms bill entirely by the hour, while only 10% exclusively use flat fees. A substantial 42% reportedly employ a combination of both hourly and flat fee arrangements.

This report carries significant implications for law firm management and the broader legal services market. It challenges the prevailing narrative that the legal industry is rapidly shifting away from the billable hour, providing concrete benchmarks for small and midsize firms. The data suggests that while alternative fee arrangements (AFAs) are a topic of discussion, hourly billing remains the practical and preferred model for a majority of firms in this segment. Tanya Hendricks, Chief Product Officer at 8am, highlighted the importance of such benchmarks, noting that many firms make billing decisions without adequate data, and the report demonstrates that the industry narrative on flat fee adoption does not align with the reality for most SMB firms.

The legal context for billing practices is governed by ethical rules, such as the ABA Model Rules of Professional Conduct, which permit various fee structures, including hourly and flat fees, provided they are reasonable and clearly communicated to clients. This report, while not a legal ruling, provides crucial market intelligence that informs how firms operate within these ethical boundaries. It indicates that profitability gains for small and midsize firms are not primarily driven by increased hourly rates or more hours spent per case, but rather by improved efficiency in converting recorded time into invoiced time, leading to a 3-5% increase in earnings per hour billed and a 5-8% increase in total monthly billings.

Key parties involved in this development are the professional business platform 8am, its Chief Product Officer Tanya Hendricks, and the numerous small and midsize law firms whose billing practices were analyzed. The report serves as a vital resource for these firms. For practitioners and law firm leaders, the takeaway is clear: rather than feeling pressured to abandon hourly billing entirely, firms should focus on optimizing their existing hourly billing processes. This includes enhancing time capture, improving billing realization rates, and streamlining invoicing procedures to maximize revenue from recorded time. While exploring AFAs remains prudent, the data suggests that significant financial improvements can still be achieved by refining traditional hourly billing models, which remain the dominant practice.