What counts as an unbillable hour for this purpose?
Any hour a fee earner spends on work that is not charged to a client. That is a broad category, so narrow it before you count. The useful hours to measure are the ones spent producing documents and records around the chargeable work: writing it up, reporting on it, proposing it, updating the client on it and evidencing it for compliance. They repeat, they follow a structure, and they usually fall on experienced people.
Leave out time that is non-chargeable by choice and worth doing, such as training, supervision or business development. Leave out time that was recorded as chargeable and then written off, which is a pricing question rather than a process one. What remains is the time the firm spends on the work around the work.
What are the steps?
- Choose the areas. Four cover most professional services firms: write-ups and reporting; bid and proposal production; client updates; and compliance and audit evidence. Add another only if it is large and distinct in your firm.
- Estimate hours per fee earner per week for each area. Think of a typical fee earner in a typical week, not the busiest one. Use bands, because nobody knows their weekly reporting time to the minute: under 1 hour, 1 to 3 hours, 3 to 6 hours, or more than 6 hours.
- Turn each band into a single number. Take the middle of the band: 0.5 for under 1 hour, 2 for 1 to 3, 4.5 for 3 to 6, and 7 for more than 6. The top band has no upper limit, so 7 is deliberately cautious.
- Add the areas together. That gives the unbillable hours for one fee earner in one week.
- Multiply by the number of fee earners. Count the people whose time you bill, or could bill. Support staff are left out because their time is not charged in the first place.
- Multiply by 46 working weeks. That is the year's unbillable hours, allowing for holidays and bank holidays.
- Multiply by your average charge-out rate. That is what those hours would be worth if they were billed. An average across fee earners is good enough for a decision.
What does a worked example look like?
This is an illustration of the method with made-up inputs. It is not a claim about any real firm.
Take a hypothetical firm with 30 fee earners. Asked about a typical week, the partners settle on these bands for one fee earner:
| Area | Band chosen | Hours counted |
|---|---|---|
| Write-ups and reporting | 3 to 6 hours | 4.5 |
| Bid and proposal production | 1 to 3 hours | 2 |
| Client updates | 1 to 3 hours | 2 |
| Compliance and audit evidence | Under 1 hour | 0.5 |
| Per fee earner, per week | 9 |
Nine hours a week, multiplied by 30 fee earners, is 270 unbillable hours a week across the firm. Multiplied by 46 working weeks, that is 12,420 hours a year. The annual cost is 12,420 multiplied by the firm's average charge-out rate. Put your own rate into the unbillable hours calculator and it does that last step for you.
The example also shows where to start. Write-ups and reporting is the biggest single block: 4.5 hours multiplied by 30 fee earners is 135 hours a week, half the firm's total on its own. If two areas had tied, the one that follows the same structure every time would come first, because it is the quicker one to rebuild.
What does the audit assume?
The audit uses exactly this method, and it shows every assumption on the result. It asks ten questions, including your number of fee earners, your average charge-out rate and a band for each of the four areas. It counts each band at its midpoint as above. It assumes none of this time is billed. It multiplies weekly hours by your fee earners, treats a year as 46 working weeks, and calculates the annual cost as weekly hours multiplied by your charge-out rate multiplied by 46. It then names the area with the biggest block of time as the process to tackle first, using your answer about which area follows the same structure every time to break a tie.
How do you check the estimate is sensible?
- Ask the people who do the work. Partners often underestimate the time juniors and managers spend on reporting, and overestimate their own. A five-minute conversation with three or four fee earners at different levels will tighten the bands.
- Keep a one-week diary. Ask a handful of people to note, each day, time spent on the four areas. One ordinary week is enough to confirm or correct the bands.
- Compare with timesheets. Look at non-chargeable codes for a recent quarter. Expect your estimate to be higher, because much of this work happens between recorded tasks.
- Test the top band. If several areas land in "more than 6 hours", check whether the same hours are being counted twice, for example a client update that is also part of a monthly report.
What mistakes make the figure misleading?
Three are common. The first is double counting, where one task sits in two areas. The second is using the headline charge-out rate when the firm routinely bills below it; if so, use the rate you actually realise. The third is treating the annual cost as money in the bank. It is the value of the time, and it only becomes income if the freed hours go to chargeable work, to winning new work or to avoiding a hire. Measuring return on AI covers how to track that after a change, and the capacity calculator looks at what freed time is worth in practice.