This article was originally published by ALM in Law.com.
While subscription payment options are becoming more common, legal staffing providers and their clients say it may not become the de facto choice for all clients.
The subscription model is spreading across legal services, from e-discovery to lawyers’ client services. Now, more lawyer staffing agencies are also offering subscription-based options to their clients to help those facing consistent, voluminous legal matters.
Previously, most lawyer and paralegal staffing agencies offered a “success fee,” or contingency arrangement. At lawyer and paraprofessional staffing agency Hire an Esquire Inc., for example, the client pays a one-time placement fee that is a percentage of a direct hire’s first-year salary and contract attorneys or paraprofessionals are billed through the agency for an ongoing hourly markup, explained Hire an Esquire CEO Julia Shapiro.
But, as many lawyers embrace subscription pricing in their personal life, such as Netflix and Spotify, they are also increasingly expecting subscription models in their legal practice, Shapiro noted.
“Even e-discovery started as a manual process [where] you were scanning documents and OCRing them and you were paying per document. Now e-discovery is often a subscription service, you pay flat rates for storage and usage. We’ve seen more services go this way and I think … it’s inevitable [recruitment] becomes more automated to a subscription and flat fee model,” she said.
In response to legal’s growing appetite for subscription pricing models, Hire an Esquire announced on Jan. 5 that it was officially launching a monthly subscription payment option, in addition to its success fee rate. With its subscription model, law firms have access to vetted applicants, and after the firm interviews and hires the applicant, the candidate is paid by the firm, Shapiro explained.
Still, while Shapiro said the additional payment option allows her company to better serve all sizes of the market, she doesn’t believe all clients will leverage a subscription model.
“The smaller clients like the [subscription] model because they don’t like to talk to a recruiter,” she said. She added, “Our smaller clients in general have smaller projects, it’s not the same arrangement like with the larger corporate law departments.”
Larger clients, however, typically prefer the success fee model because all candidate interviews, payroll, medical insurance and other details are handled by Hire an Esquire in exchange for a flat rate being paid to the staffing agency, Shapiro said. “They want a white-glove relationship with the recruiter.”
However, small firms don’t always prefer one pricing model to another. For instance, Sasha Ablovatskiy, a partner at New York City-based boutique Foley Shechter and a Hire an Esquire client, noted his firm’s subscription preference is dependent upon the complexity and length of a legal matter.
“I think a lot of things we can handle ourselves but if it’s a one-off or a long one-off matter dealing with the attorney, we prefer the success fee,” Ablovatskiy said. “But if something is going to be a prolonged matter that will last over a longer time, the subscription model makes sense for us. We don’t have to worry about insurance, we don’t have to worry about paying them directly. Hire an Esquire handles all of that for us, we don’t have to worry about that.”
The expense of service fee rates versus a subscription fee is also considered by clients, Ablovatskiy added. A staffing agency’s success fee rate can raise the lawyer’s rates to an uncomfortable figure for some clients, he noted.
“Ultimately for a firm of our size, clients want quality but they don’t want to take on bigger, large firm rates. When we can charge less at an hourly rate, it’s a win for everyone,” Ablovatskiy said. Likewise, subscription pricing for staffing meshes well with its flat fee arrangements for clients.
“If we give the client a flat fee, we need to know how much we’re going to pay [for an attorney from a staffing agency],” Ablovatskiy said. “We can budget.”
Still, while clients are driving the shift to subscription models for managed review and staffing agencies, TransPerfect Legal Solutions’ Information Governance division president Dan Meyers said alternative payment options aren’t a deal-breaker for most clients.
“It’s a factor clients consider, it’s very rarely one of their primary objections,” Meyers noted. “It’s rare that a client will come and say: ‘If you don’t offer this we’re simply not interested in working with you.’”