Nearly all private law firms require paralegals to keep track of the time they spend on specific tasks. The timekeeping record ordinarily shows the date of the legal service, the client for whom the service was performed, the specific legal service performed, and the amount of time spent performing the legal service. The time a paralegal devotes to a task will determine how much the client is billed for the service. Even for law firms that do not charge clients by the hour, as in a traditional plaintiff's personal injury law practice, timekeeping provides the managing lawyers with useful information.
The daily routine of a paralegal often involves working on several different client matters, including taking telephone calls, responding to e-mails, receiving assignments, etc. To make sure you capture all of the billable time in a day, you should allow yourself several opportunities to record the time you spend on client matters.
Importance of Timekeeping
Timekeeping is one of the most important aspects of a paralegal's job. The usefulness of time records is not limited to client billing. The time record provides valuable information about several aspects of a law firm's practice:
Time records document the progress of a client's legal matter by showing what service was provided and when it was provided.
Time records show who is working on what aspect of a client's legal problem and provide a means of ensuring appropriate staffing decisions.
Time records show the time spent on specific tasks, providing information about the competency and efficiency of the timekeeper.
In addition to providing managerial information, time records play a crucial role in the economics of a law firm. Time records allow a firm to determine the profitability of specific client matters by comparing the total fee collected with the time spent to generate that fee.
If time records show that a practice area or type of case is consistently unprofitable, the law firm can decline those cases in the future. Time records are of great assistance in preparing attorneys' fees applications for the court. In some types of lawsuits, the winning party may recover attorneys' fees from the losing side, subject to court approval. In these cases, the winning lawyers often submit time records as in support of a request for attorneys' fees.
Time records are also the primary method of measuring productivity in a law firm. In an hourly billing system, the amount of time spent on a matter governs the charge for the legal service to the client. The amount of money billed to the client by each income generator in the law firm is a measure of the productivity of that person.
Mechanics of Timekeeping
The information on a time record usually includes the date, the client, a file number, a description of the service, the identity of the person performing the task, and the amount of time spent on the task. Time is recorded in parts of an hour. Most clients now require that time be recorded in tenths of an hour. Under this system, a task that takes thirty minutes is recorded as 0.5 of an hour. The minimum recordable time is 0.1 of an hour, or six minutes. If the timekeeper bills the client $100 per hour, the client is charged $10 for each six minutes spent on his legal problem.
Time records can be kept manually. There are several different manual timekeeping systems available, but each operates on the same principle. In a manual system, the timekeeper writes the timekeeping information on perforated sheets. When a timesheet is complete, it is turned into the law firm's billing department. Each section of the sheet, or time slip, is matched to the specific client matter and later used to prepare a bill.
Computerized timekeeping systems can be a stand-alone time and billing system or an integrated part of a more complex case management system. Computerized timekeeping systems record the same information as a manual system. Some software provides automatic time calculations — the user starts the clock when beginning a task and stops it when finished. Most software also feature automatic fee calculations, which can be useful if the client has imposed a legal budget.
Billable Versus Nonbillable Hours
An hourly billing system places a premium on the time spent performing some legal service for the client. This time is known as
Understanding billable time is an important factor in managing the expectations between a legal employer and a paralegal. As mentioned, the legal employer calculates the hourly billing rate for employees based on the allocated overhead cost. By multiplying the hourly rate by the number of hours the employee is expected to bill in a year, the employer can estimate the total return from each employer. This process produces a yearly billable-hour requirement. Billable-hour requirements for paralegals typically range from 1,400 to 1,600 billable hours per year. A paralegal who bills more than the billable hour requirement increases the profits of the law firm.
When a paralegal reports an amount of nonbillable time that is disproportionate to the amount of billable time, the discrepancy may indicate an imbalance in billable assignments, a lack of client work for that paralegal, or some type of employee problem. Keeping track of your own nonbillable time, even if not required by the employer, allows you to be proactive in reaching your billable time goal.
Nonbillable time is not included in the billable hours requirement.
It is “lost” time as far as the law firm is concerned. Nonbillable time includes time spent on personal matters — eating lunch, running errands, or receiving personal phone calls. It also includes “water-cooler” time — the time spent talking with other law firm employees about things that are not directly client related.
All client matters require some nonbillable time. Also known as administrative time, this is time spent on the client's legal matter that is not chargeable as a professional service. Examples include opening a client file and organizing documents. These activities are not billable because they do not result in a product for the client. Additional administrative time may be required by the law firm due to required attendance at staff meetings, marketing activities, or library maintenance.
The final large category of nonbillable time is pro bono activities. All lawyers are under an ethical obligation to provide pro bono, or uncharged, legal services. Both the NALA and the NFPA suggest that paralegals provide pro bono services as well.