October 4, 2005
Law Firm Surcharges Increase in Popularity
Not long ago, we did a series of focus groups around the country dealing with expense recovery. We were trying to determine the additional technology needs of law firms when it comes to managing the collection and recovery of client-related cost and expenses.
We discovered that law firms appear to be moving away from specific recovery of soft cost transactions such as internal copying, faxing and even phone service. Some simply consider those costs to be covered by the law firm’s service fees. Others, however, have implemented a surcharge on professional services fees.
Juris® client service professionals report that they have worked with numerous firms that have implemented such charges—generally between 3 and 5% of fees. This typically covers all soft costs (fax, copies, postage, etc.). The firms with surcharges higher in the range (for example those charging 5%) included express and courier delivery such as FedEx ® as items covered by the surcharge. Firms usually labeled the new fee item as an "administrative charge." Implementation starts by including the charge in their engagement letter along with a clear explanation.
It appears that those taking the surcharge approach have been very successful with it experiencing little client resistance. It is a win/win for law firms since they no longer have the burden or cost of tracking of soft costs' details, and yet the law firm doesn’t have to forego an important source of revenue.
The approach is worth considering.
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Filed under Policies/ Procedures by Tom Collins