Guest post from Kevin Chern.
Last month, I read a blog post that suggested attorneys who could afford it should outsource some of their daily tasks to increase productivity. While that suggestion was a good one, it also implied that outsourcing might be something many attorneys cannot afford. That’s probably not accurate.
It is true that some solo practitioners run one-person operations, juggling their own phones, marketing, accounting, research and other administrative work. This one-man-show, however, is not usually very efficient and often drains attorneys of time that could be better spent making money doing actual legal work. Attorneys who want to make the most of their billable hours usually hire at least one assistant or clerk to help manage their law firm.
Assuming that many attorneys have moved past the inefficient one-man-show model, which option is more cost-effective—hiring employees to help manage a law firm or outsourcing administrative and non-legal tasks to a virtual worker? The simplest way to answer that question is by measuring the costs of each option. While the exact figures may vary from firm to firm, here are a few things attorneys should look at when determining which office management options are best:
Cost Considerations When Hiring Employees
The first cost that comes to mind when hiring employees for a law firm is the cost of paying wages or a salary. According to the Department of Labor Statistics, paralegals in the U.S. make anywhere between $29,000 to $73,000, and legal secretaries make between $25,000 and $63,000. On top of spending a minimum of $25,000 a year to staff your office with an entry-level paralegal or secretary, other costs come into play, as well. You may need to spend extra money on recruitment to purchase ad space or gain access to job websites.
In addition to salary or wages, you may incur costs for providing benefits, such as healthcare, other insurance plans, 401k matching and paid time off. Plus, you will need additional space so that your employee can work. That can lead to added rent costs, new desks, additional office chairs, separate phone lines, computers and other overhead costs. In addition to the expenses you will have hiring and staffing your law firm, you may run into more expenses when an employee no longer works at your law firm, such as unemployment compensation, severance allowances and workers comp payments. Add these costs to the time and work it will take for you to recruit, hire and maintain employees, and in-house staff costs can really add up for attorneys.
Cost Considerations When Outsourcing
If an attorney uses a legal process outsourcer, ethics rules restrict the attorney from marking-up attorney fees and passing those costs on to clients. This means that attorneys may lose an opportunity for additional billable hours attributable to support staff when hiring outsourced workers since they cannot charge hourly paralegal fees to clients, but virtual workers and legal process outsourcers can still help attorneys save money by giving attorneys more time to add billable hours for actual legal work and reduce overhead costs and employment expenses.
Virtual workers and LPO services are not employees of the attorney’s law firm. Instead, they act as independent contractors or employees of the LPO agency. This means that attorneys who use virtual workers and LPO services can avoid many of the costs incurred by hiring in-house staff, such as taxes, paid time off, benefits, salary and wages. In addition, outsourced workers are only paid for the work that they actually do, not for the time they sit at a desk. The U.S. Department of Labor estimates that the average worker is productive for only 70% of the workday.
If an attorney is paying in-house staff to work 8 hours each day, that attorney is also paying for about two-and-a-half hours each day of unproductive time. In addition, many virtual workers and LPO providers are set up on a per-call or a per-case payment plan. That means that attorneys are not required to pay outsourced support staff during slow seasons just to keep them employed for future busy seasons. Another added cost benefit to hiring virtual workers and LPO providers is that you can hire experienced staff that has already been trained for you at rates equal to or less than what you might pay to hire and train an entry-level employee.
Only you can decide whether or not outsourcing is the right solution for your law firm. The important thing is to make sure that you have complete and accurate information before making that decision, and aren’t acting on assumptions or overlooking costs or benefits that might tip the scales.
Kevin Chern is the President of Total Attorneys, a technology-enabled service provider dedicated to assisting with every aspect of small and solo law firm practice management, growth and development.
Originally published on April 20th, 2010 and updated on July 3rd, 2019.