ACKNOWLEDGEMENTS The Standing Committee on Paralegals would like to acknowledge the generous contributions of D. Jeffrey Campbell, Esq. and the firm of Porzio Bromberg & Newman, P. C. to this product. Mr. Campbell was a member of the American Bar Association Standing Committee on Paralegals from 2000 to 2004, serving as chair of the Standing Committee from 2002 to 2004. He is a frequent author and speaker on the topic of paralegal utilization, having previously presented at seminars for the American Bar Association, the New York Bar Association, the New Jersey Bar Association and the Legal Assistant Management Association. Mr. Campbell is the managing principal of Porzio, Bromberg & Newman and resident in its Morristown, New Jersey office. His practice encompasses the areas of product liability, toxic tort and insurance coverage litigation. He has particular expertise in the coordination of multi-case, multi-party, multi- jurisdictional litigation. These materials were utilized in a panel presentation during the 2005 American Bar Association Annual Meeting in the course of the General Practice, Solo & Small Firm Section’s Solo Day activities.
Five Advantages to Paralegal Utilization Increased Firm Leverage Improved Firm Profits Improved Return on Investment Improved Client Satisfaction and Retention Improved Lawyer Quality of Life
Five Prerequisites to Paralegal Profitability Selecting the Appropriate Person Assigning the Proper Work Involving the Paralegal as a Team Member Conferring Trust in the Paralegal Pricing the Work Properly
Evaluate Costs: Compensation Costs –Salary, Bonus, Payroll Taxes and Fringe Benefits Direct Costs –Allocated portions of Rent and Secretarial Support Indirect Costs –Supplies, Technology, Utilities, Social Activities, Insurance, Business Taxes, Compensation Costs of Non-Billing Personnel
Partners account for three times as much general overhead cost, and associates twice as much, as do paralegals.
Typical Paralegal Costs Salary (Compensation Cost) $40,000 Taxes & Fringe Benefits (Compensation Cost) + 10,000 Allocated Space (Direct Cost) + 2,000 General Overhead (Indirect Costs) + 43,000 Total Cost of Paralegal $95,000
Cost Per Hour Total Cost Billable Hours = Cost Per Hour Example $95,000 1550 = $61.29
Estimate Revenues: Revenue Potential Hourly Rate x Anticipated Billable Hours = Revenue Potential Example $90 x 1,550 = $139,500
Estimate Revenues: Actual Revenue Revenue Potential x Collection Realization Rate = Actual Revenue Example $139,500 x 92.5% = $129,000
Profit Actual Revenue – Costs = Profit Example $129,000 - $95,000 = $34,000
Improved Client Satisfaction and Retention Reducing Legal Fees
All Work by Lawyer at $200 Per Hour TaskHours Cost Client Interviews 4 $800 Witness Interviews 6 $1200 Responding to Written Discovery12 $2400 Preparing for and Taking Depositions12 $2400 Legal Research 10 $2000 Preparation of Pleadings12 $2400 Trial Preparation16 $3200 Trial 16 $3200 Total 88 $17,600
Work Delegated to Paralegal at $90 Per Hour Task Timekeeper Hours Cost Client Interviews: Lawyer 4 $800 Paralegal 4 $360 Witness Interviews: Lawyer 2 $400 Paralegal 6 $540 Responding to Discovery: Lawyer 2 $400 Paralegal 14 $1260 Prep. for and Taking Deps.: Lawyer 6 $1200 Paralegal 7 $630
Work Delegated to Paralegal at $90 Per Hour (Cont’d) Task Timekeeper Hours Cost Legal Research: Lawyer 2 $400 Paralegal 12 $1080 Preparation of Lawyer 2 $400 Pleadings: Paralegal 14 $1260 Trial Preparation: Lawyer 8 $1600 Paralegal 16 $1440 Trial: Lawyer 16 $3200 Paralegal 16 $1440 Total: 131 $16,410
Reducing Legal Fees: Cost to Client Scenario 1 Lawyer Works 88 Hours Scenario 2 Lawyer Works 42 Hours Paralegal Works 89 Hours Client Saves $1,190, or 6.8% Costs Client $17,600Costs Client $16,410
Reducing Legal Fees: Cost to Firm Scenario 2 Lawyer Works 42 Hours at $145/hr. Paralegal Works 89 Hours at $61/hr. Total Cost to Firm = $11,519 Firm Saves $1,241 or 9.7% Scenario 1 Lawyer Works 88 Hours at $145/hr. Total Cost to Firm = $12,760