Legalsense offers various options to set rates and valuations of work (fees/time entries). To determine what rate or pricing needs to be applied to a client or matter, Legalsense uses pricing schemes. In this article we discuss the different pricing schemes available.
Rates in Legalsense are connected to a user, function or activity (time entry code). If a user (employee/associate) has his/her individual rate we refer to that as the 'personal rate' of the user. A user that does not have a personal rate, will inherit the rate from the function (job title/role) of the user. A function always has a rate (required field). For example, if a user has the function title of 'Partner' in Legalsense and that function has a rate of EUR 300,-, then all users with the function 'Partner' will have that rate assigned. When a user needs a different rate than the function rate, you can set a personal rate for that user.
Setting the rate for a user can be done by viewing the user page (main menu: Users - then click on the name of the user). On the user's page there is a section called 'Rate and function' which displays the current settings. If there is no personal rate set, the value for 'Is function rate' will be set to 'Yes'. The personal rate of the user or the function can be changed by choosing 'Edit' behind the value.
The rate of a user and the function (and also the rate of the function) are connected to a date period. When editing the rate you will for example notice fields for a begin and end date. Please leave these fields empty if you want to have the rate always applied. If you want to set the rate until a specific date, you can fill in an end date (and leave the begin date empty). If you want the rate to start on a specific date, fill in the begin date and leave the end date empty. Usually you will leave the begin date empty for the first (oldest) row and leave the end date empty for the last (latest) row.
Please note: when a user does not have a personal rate, the rate of the function will be applied. If you do add a personal rate and for example add a begin date of today, all time entries before today will be valued against the function rate. If you want the personal rate to always apply, please leave the date fields empty (and it will apply for eternity - and perhaps beyond).
For an activity (time entry code) there is also a separate rate field available. Please see below "Activities separately priced" for more information on how these rates are used.
The valuation of work for a client or matter is based on the pricing scheme that you can set for the client or matter. Apart from the default pricing schemes that you can select, you can also add price templates based on these pricing schemes. Price templates will be added to the list of available choices for a pricing scheme for a client or matter. Which default pricing schemes are available depends on the configuration of your Legalsense environment. If you want to change the available choices, please contact Legalsense support.
The default pricing schemes in Legalsense are:
- Fixed price (fixed fee)
- Fixed hourly rate (blended rate), and Fixed hourly rate, activities separately priced
- Rate per user, and Rate per user, activities separately priced
- Capped price
Pricing schemes that are optionally available:
- Dutch Legal aid
- Recofa (Dutch insolvency cases)
- Rate per function
- Rate per activity
In your environment there is one price template that has been set as default. When you create a new client, this pricing scheme is automatically selected. In a default Legalsense environment the default pricing scheme is set to 'Rate per user, activities separately priced'.
A client always has a pricing scheme. A matter for a client, will inherit the client pricing scheme. For a matter you can choose a different pricing scheme (if needed). The pricing schemes for 'Fixed fee' and 'Capped price' are only available per matter - they are considered 'project' based. The optionally available choices for 'Legal aid' and 'Recofa' (insolvency) are also only available per matter.
Activities separately priced
In the above mentioned pricing schemes there are a few that have 'activities separately priced' in their name. This addition means that when an activity has the option 'separately on invoice' set, the activity will be billed against its own activity rate. All time entries that have that activity set, will then not be billed against the hourly rate of the user (of the user's function) but instead will follow the activity rate. These time entries will also be separately grouped on the invoice specification. You can set a different activity rate per client or matter (if you want to deviate from the default activity rate that has been set).
1. Fixed price
A fixed price or fixed fee will assume that all work in a matter/project will be billed against that price. If you select this pricing scheme, a field will appear for the amount of the fixed fee. Legalsense generally assumes that you will bill this fee after all the work is done. If you want to bill the fee ahead or in separate parts, we recommend creating advance invoices (and optionally renaming these so that they are not called 'advances' on the invoice itself). The final invoice can then be a settlement where you bill all the work (time entries) and settle the already billed advances.
On the (default) specification of a fixed fee invoice the time entries are grouped together in one invoice line 'Activities fixed fee'. For fixed fee invoices, it is more common not to include a specification with your invoice. N.B. In Legalsense you can also easily change the total fee amount to a specific amount (fixed fee) when editing the invoice - this applies to every invoice regardless of setting the matter pricing scheme to 'fixed price'.
A fixed fee does not have a begin and end date in Legalsense. This means that the fixed fee applies to all the work on a matter. After the fee has been fully billed, all open time entries (work in progress) will be valued as 0 (zero). For example, if you set a fixed price of EUR 5.000 and already billed time entries to an amount of EUR 3.000, the remaining work in progress will be valued for a maximum of EUR 2.000. If the value of the work in progress is less than EUR 2.000 (against your default hourly rates) and you create an invoice for that matter, it will still be billed as EUR 2.000. A fixed price/fee always assumes that that is the amount you can bill, regardless of the actual work you have done (and whether this is worth less or more than the fixed fee). Please see below for the alternative to a fixed fee: the 'Capped price'.
2. Fixed hourly rate, and Fixed hourly rate, activities separately priced
For this pricing scheme you can set one hourly rate (often also called a 'blended rate'). All time entries will be billed against this hourly rate regardless of the user who performed the work. In the date fields you can add a begin and end date for the rate. This allows you to for example set a fixed rate until 31/12/2018 and then add another rate that starts on 1/1/2019. When using the date fields you are required to make sure the periods do not overlap and that the first rate does not have a begin date and the last rate does not have an end date.
On the invoice time entries can still be split by user (person) or they can be grouped into a single invoice line 'Activitities fixed rate'. The latter means that the invoice specification by default will not display who performed the work.
3. Rate per user, and Rate per user, activities separately priced
This pricing scheme is probably the most commonly used as it assigns an hourly rate to every user (person) for the client or matter. If no specific rate is set for a user, it will default to the current user rate (which in turn defaults to a function rate if the user does not have a personal rate). On an invoice specification (by default) the time entries will be split per user and rate. If you have an invoice in which one user has multiple rates, for example when billing over a period where that user had a change of his/her rate, the invoice will have multiple invoice lines for that user.
You can set different rates per user when editing the client pricing or the matter. The rates also have date fields to optionally specify a begin and end date. When using the date fields you are required to make sure the periods do not overlap and that the first rate does not have a begin date and the last rate does not have an end date.
4. Capped price
The pricing scheme for a Capped price is comparable to the Fixed price pricing scheme (see above). The main difference is that with a capped price the actual fees will be billed against an hourly rate if you did not reach the 'cap' (maximum) amount.
Example: if a matter has a capped price of EUR 1.000 and the work in progress is valued at EUR 800 then the invoice will be for an amount of EUR 800. If you have a value of EUR 1.100 on the matter then the invoice would been 'capped' at EUR 1.000 (as that was the agreed maximum amount).
The valuation of time entries (fees) will be based on a price template that you will have to select when setting the capped price on a matter. You can add price templates in Legalsense by going to 'Settings - Lists - Price templates'. If you want the capped price to be calculated against your default hourly rates, we recommend creating a price templates that you call for instance 'Default rates (used for capped price)'. When selecting 'capped price' there will be a field 'Scheme below cap' in which you can select this price template.
An invoice for a capped price matter will by default group all work (activities) in a single invoice line ('Activities capped price') similar to how that works for a fixed price matter.
5. Dutch Legal aid
This pricing scheme applies to Dutch matters that are based on a so called 'toevoeging'. In these cases, most of the lawyers fees are subsidized through a system of 'legal aid'. When selecting this pricing scheme, a few extra fields will appear in which you can specify more information about the 'legal aid' matter. The points field allows you to set the amount of points that got assigned to the matter. These points are used to value the time entries once you create an invoice to the "Raad voor Rechtsbijstand" (RvR). The 'client contribution' field allows you add an amount that the client will have to pay in this matter. You can then create an invoice to the client for this amount. More information about how Legalsense works with Dutch legal aid is available in a separate article. As this only applies to The Netherlands, this information is only available in Dutch. See Toevoegingsdossiers.
6. Recofa (Dutch insolvency cases)
When you have marked a matter as a 'Recofa' matter (Dutch insolvency case) the pricing scheme 'Recofa' will be automatically selected. This means that the valution of the time entries in the matter will be calculated based on the Recofa rules. There will be a maximum valuation ('cap') applied based on the 'Recofa cap' value that you can add to the matter. If you do not want the 'Recofa' pricing to apply to the matter, you can still select a different pricing scheme for an insolvency matter.
More information about how Legalsense works with Dutch insolvency matters is available in a separate article. As this only applies to The Netherlands, this information is only available in Dutch. See Faillissementsdossiers binnen Legalsense.
7. Rate per function
When you have made a pricing agreement with your client that is based on the function/role of the person who performs the work, for example 'partners EUR 300, senior associates EUR 275, associates EUR 225, etc.', it can be helpful to also set the rates for that client or matter per function instead of having to do that per user (person). The pricing scheme 'Rate per function' always uses the rates that have been set on the function. A user always has a function (required field) and can also switch functions by having an end date for the previous function and a begin date for a new function (level).
Example: a function "Partner" has a rate of EUR 350. All users that have that function (i.e. all partners) will then have their work valued against that rate of EUR 350. So when partner X writes 2 hours of work on a matter, the work is valued as EUR 700.
8. Rate per activity
In this pricing scheme all work will be valued against the rates of the activities. You can set a separate rate per activity (see above "Activity rates"). For example, you have an activity 'Drafting' with a rate of EUR 200 and you write 30 minutes of work (0,5 hour) on a matter that is priced per activity. Your work will then be priced against the activity rate and valued at EUR 100.