Legal Aid Costs: How to Improve Recovery and Efficiency
Since hourly rates have not kept up with inflation, it is very important for firms to maximise their profit and to be more costs conscious.
First of all, firms should be aware of how much it costs them to run the practice. Ideally, a solicitor should bill around 1200/1500 hours per year, although the Law Society suggests an average of 800 hours per year. A quick way to compare the charged hourly rate with the one that should be charged, is to sum up all the annual costs for a firm (i.e. rent, insurances, utilities, electronics, wages of support staff and salary of fee-earners etc) and divide the total by the number of billable hours per year. Once the cost per hour that should be achieved is determined, the firm should compare it to the current LAA hourly rates.
It is crucial for a legal aid practice to be disciplined when undertaking work within legal aid. Applying the correct legal aid rate is one of the first steps to making sure it is done accurately. Indeed, applying the wrong rate may lead the solicitor to think the case might be exceptional, thus undertaking extra work, when, in fact, it is not. In this case, having set the correct rate at the outset would allow the solicitor to deal with the matter quickly and, potentially, deal with other claims at the same time, maximising their profit.
Accurate time recording is essential to ensure that all the work done is going to be paid. When setting up a case, solicitors should also consider whether the client presents more than one case type, in which case a separate file for each must be kept with separate time recording.
Work done by non fee-earners (e.g. secretaries) may be charged at the same rate as if it was done by the solicitor. This can be done only in specific situations, for example the secretary sees a client who shows up without a previous appointment. The secretary may take a detailed note of the meeting with the client. In this case, the work done can be claimed as if done by the fee earner. The authority for this is to be found in the case of Lord Chancellor v Smith Graham.
As much as possible, solicitors should assess the costs that may be obtained at the outset of the case to ensure that the best cost recovery is achieved. Where fixed fees do not apply (or where the case escapes the fixed fee threshold), enhancements will come into play, making the case more profitable to conduct. 2 An appropriate approach would be to add 5% increments for each distinct ground. 3 It is important that solicitors do identify the grounds for enhancements as the case progresses, and that these are noted down.
One of the most important things to do is to refer continuously to the costs limitations and compare it with the time recording, which should show a running total. At the same time, the solicitor has to consider whether the case is moving outside the scope limitation. In each case, amendments can be made at specific times but if the solicitor fails to request any type of amendment, any work done outside the scope and/or the costs limitation, will not be covered under the certificate.
Finally, it is crucial to know what to charge and how much the solicitor can charge upon that specific activity. It is strongly recommended that practices follows the guidance from the Legal Aid Agency as well as consulting with a costs lawyer/costs draftsman to better understand how to maximise their profit by avoiding underestimating work done or, even worse, to do no bill for work done at all.