FIGURING LAWYERS’ NET INCOME
The practice of charging for the lawyer’s time on an hourly basis is a method of charging for the office’s total work product. It includes the great majority of the work of the support staff, use of the facility, and implementation of the office’s equipment. This is why the lawyer’s net income cannot be determined simply by multiplying the time spent on a case by the hourly rate. The money paid the lawyers goes first to the payment of such overhead items as the support staff, telephone system, photocopying machinery, postage machinery, computer equipment, typewriter equipment, office space, heating, water and other utilities, etc. The lawyer’s net income consists of what remains after the subtraction of the cost of all these items from that lawyer’s total income.
An individual unfamiliar with the foregoing facts may be overheard to say, “I don’t understand why, when I make $10.00 an hour, I have to pay many times that amount to the lawyer for each hour of legal work; lawyers aren’t worth ten times what I make.” Such comments overlook the fact that the fund from which the lawyer pays the overhead expenses of the office is the money the client pays for attorney fees. The hourly rate is, in reality, the office’s method of charging for all its services, and is not the amount the lawyer earns per hour.