8 of 9 Top Alternative Fees Are Still Built on the Billable Hour, Best Law Firms Survey Finds

The current narrative around law firms and billing goes something like this: In the age of artificial intelligence, firms face an existential crisis over billing, with clients clamoring for them to embrace alternative fee arrangements, use AI to reduce costs and break their reliance on the billable-hour business model.

But new survey data from Best Law Firms shows that the reality is more complex.

While it’s certainly true that clients are pressuring firms to lower prices, the rate of adoption for alternative fee arrangements has hardly budged during the last three years—and has even slipped slightly. In 2026, 70% of U.S. law firms said they offered clients at least one alternative billing option, down from 72% in 2025, the survey shows.

The survey also found that AI is having some impact on firms’ billing practices, though not at the speed clients may anticipate. Meanwhile, many of the most popular alternative fee arrangements (AFAs) do little to untether firms from the billable hour. Indeed, eight of the nine most-used AFAs retain a strong billable-hour component, the survey shows.

As part of its annual research and rankings process, Best Law Firms collects survey data from thousands of U.S. firms. Nearly 5,800, ranging in size from solo practices to national and global firms, participated this year. Among other questions, the survey probes law firms’ billing practices, including whether they offer alternative fee arrangements, generative AI’s impact on their billing practices, the types of AFAs they use and the steps they are taking to help clients understand their bills.

Alternative Fee Use Fell Across Every Firm Size

The declines in overall AFA use occurred across all firm size categories. The biggest drop was in firms with 50-149 lawyers. In that group, the share using alternative fee arrangements declined 5.7 percentage points year over year from 90.8% of firms to 85.1%.

The survey also showed that:

• Firms with 150+ lawyers were down a half point, from 95.3% to 94.8%.
• Firms with 20-49 lawyers fell about 1 point—78.5% to 77.6%.
• Firms with 2-19 lawyers dropped 1.5 points, from 67.9% to 66.4%.
• Solo practices declined 2.7 points—69.5% to 66.8%.

Why Are Law Firms Pulling Back on AFAs?

Best Law Firms does not ask firms to explain the specifics of their decisions to offer or not offer AFAs. However, another set of questions—regarding law firms’ revenues—may provide at least one clue about why some firms pulled back.

Average revenue rose across every size tier, the survey found, and in most cases, by double-digit percentages. If demand is high and hourly billing is producing significant revenue growth, firms may be less motivated to offer AFAs that could cap their potential earnings—even with growing corporate client complaints about pricing.

The erosion in use, however small, may also reflect alternative fees’ role in the revenue pecking order. Thomson Reuters recently estimated that 90% of corporate legal spending still flows to firms via hourly billing arrangements. In other words, AFAs represent a relatively minor share of law firm income compared to the traditional billable hour.

This may reflect a “stick-with-the-devil-you-know” attitude among many clients. While they may be critical of the billable hour, they also remain as wedded to it as their outside counsel. As Thomson Reuters recently wrote, “The billable hour, for all the prophecies, refuses to die.”

Most Popular Alternative Fee Arrangements: Flat Fees, Retainers and Contingency

Most firms are offering clients an array of alternative fee options. How many depends primarily on the size of the firm. The survey results show that, on average, U.S. law firms offer clients four types of alternative fee arrangements. Firms with 150+ lawyers tend to offer more, an average of seven AFA options. On the other end of the spectrum, solos average three AFA options.

Flat fees are the most popular form of alternative fee arrangement, available at 69% of firms overall. Nearly all firms (94%) with 150+ lawyers and 81% of firms with 50-149 lawyers offer them.

Fixed Fees vs. Flat Fees

While many lawyers use the terms “fixed” and “flat” fees interchangeably, the survey hews to a subtle distinction between the two and asks firms to choose whether they use one or both. In a guide on fee arrangements, the Association of Corporate Counsel (ACC) referred to fixed fees as “the ‘all in’ price” for a piece of work or a particular matter. A flat fee “typically covers distinct categories of services during the course of a specified period,” the ACC said. With this distinction in mind, fixed fees are used by 47% of firms, the survey found.

Among other types of AFAs, retainers are used by 63% of firms, contingency fees (59%), blended hourly rates (53%), hybrid fees (40%), capped fees (38%), volume discounts (36%) and collared fees (7%).

Why Most AFAs Still Run on the Billable Hour

For all the variety, most of the alternatives that firms use share a common DNA. With the exception of contingency fees, every AFA on the list is built—at least in part—on the billable hour. For instance, a flat or fixed fee may provide clients with a better idea of how much they will spend than in a traditional, open-ended hourly engagement. But the calculations are still based on the time lawyers typically spend on similar matters.

About 6% of the firms surveyed also said they were offering other types of alternative fees. These included arrangements like partial contingencies, payment plans, subscriptions and prompt payment discounts. Among the least commonly used were AFAs tied to value-based outcomes, like success fees and bonuses. Less than one-half of 1% of firms said they were offering those types of options.

That would hardly be music to the ears of corporate law department leaders who have been stumping for an AI-driven shift to billing methods that fundamentally challenge the billable-hour model. (We wrote in greater detail about this in March.)

Can Value-Based Pricing Replace the Billable Hour?

Value-based pricing has been discussed as a possible solution.

Late last year, in an article for The Wall Street Journal, Columbia Business School’s Rita Gunther McGrath opined that value-based pricing may be “the most obvious alternative” to the billable hour, with fees “tied directly” to the outcomes a law firm achieves or the value it delivers.

McGrath, however, acknowledged that firms and clients may not agree “on what value is fair.”

How AI Is Changing Law Firm Billing

Whether AI delivers the kind of billable-hour revolution some general counsel are seeking remains to be seen. For now, artificial intelligence’s impact on billing has been showing up gradually rather than in a single burst. In this year’s survey, firms reported a modest but palpable change in their billing practices because of AI.

Last year, 58% of firms asserted that AI was having no impact on their billing. This year, that figure declined to 49%. At the same time, the share of law firms that say generative AI has reduced billable hours for certain tasks rose from 19% to 25%. And the share who said AI was increasing efficiency without altering billables moved from 23% to 27%.

The numbers suggest that client pressure may be having an impact. Last year, a survey conducted by the ACC and Everlaw found that only 24% of in-house professionals were happy with the way their outside counsel were adopting AI for cost-effectiveness. Bloomberg, in an article about the survey, also reported that a growing number of companies were “adding provisions to outside counsel guidelines” that certain lower-risk tasks be completed by artificial intelligence with any savings reflected in the firms’ bills.

Law Firms Are Making Billing More Transparent

The Best Law Firms survey also shows that firms are making steady progress in giving clients a more transparent view of what they are charging and why.

Nearly all law firms across size categories—92%—said they now provide clients with detailed line-item invoices. And 73% of firms are proactive about pricing, having upfront conversations and sharing cost estimates with their clients. The share of firms offering regular budget updates during their engagements continues to tick up, from 55% to 58% year over year, as does the cohort of firms offering fixed fees and predictable pricing models (54% to 56%).

Firms are less likely, however, to deploy technology to assist clients. Just 15% said they offer online billing portals to allow clients a real-time view of spending over the course of a matter.

Will AI End the Billable Hour? The Survey Suggests a Resilient Model.

One could argue that greater billing transparency may give the billable hour additional staying power. Detailed invoices, upfront estimates and regular updates all help clients better understand their bills—and undermine arguments about the unpredictability of hours-based legal pricing.

The same patterns emerge in other parts of the survey. As we noted, eight of the nine most-used alternative fee arrangements are designed around the billable hour. Among firms that say AI has affected their billing, the largest group (27% of all firms using AI) says it has improved efficiency without changing their billable hours. And for all the conversation around outcome-based billing models, they still barely register with the thousands of firms participating in the survey.

For decades, legal industry prognosticators have predicted the imminent demise of the billable-hour model. AI may indeed deliver the final death blow. But if history and the survey results are any guide, firms are far more likely to find a way to preserve the hourly model than to abandon it.

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David L. Brownis a legal affairs writer and consultant, who has served as head of editorial at ALM Media, editor-in-chief of The National Law Journal and Legal Times, and executive editor of The American Lawyer. He consults on thought leadership strategy and creates in-depth content for legal industry clients and works closely with Best Law Firms as senior content consultant.