Fixed fee vs hourly — how should startups buy legal work?
By SuLe · Updated 9 May 2026
For most startup work, buy a fixed fee where you can and reserve hourly billing for genuinely open-ended jobs. Fixed fees give you cost certainty on defined tasks like an incorporation pack or a term sheet review; hourly rates suit negotiations, disputes and bespoke work that cannot be scoped in advance. Either way, agree scope, estimates and VAT up front.
Key facts
- Fixed fees give cost certainty and suit well-scoped tasks; hourly suits open-ended or contentious work.
- Startup and tech associates commonly charge roughly £250–£500 an hour; partners £400–£800+.
- As a rough guide, typical fixed fees run £1,000–£3,000 for an incorporation and founder documents pack and £500–£1,500 for a term sheet review.
- All legal fees carry VAT at 20% — confirm whether a quote is inclusive or exclusive.
- Under the SRA's rules your engagement letter must set out clear costs information — always read it.
What's the actual difference between fixed fee and hourly?
A fixed fee is one agreed price for a defined piece of work, whatever hours it takes. An hourly rate charges you for the time actually spent, usually billed in units of an hour.
The trade-off is who carries the risk of the job running long. Under a fixed fee, the lawyer does — so the price often includes a small margin for that uncertainty. Under hourly billing, you do, which is cheaper if the job is quick and painful if it drags.
That single difference drives the whole decision. Well-scoped work suits a fixed fee; unpredictable work suits hourly. Everything else is detail.
When does a fixed fee make sense?
Whenever the deliverable is clear and the process familiar. A competent startup firm can quote a fixed number for the jobs it does every week, and most will.
As a rough guide, typical fixed fees include an incorporation and founder documents pack at £1,000–£3,000, a term sheet review at £500–£1,500, an EMI scheme setup at £2,000–£5,000, and SEIS/EIS advance assurance support at £500–£1,500. Treat these as market practice, not quotes, and add 20% VAT.
The value is not just the price — it is the certainty. You can budget, compare firms, and avoid the anxiety of watching a clock, which for a cash-conscious founder is worth a modest premium.
| Legal job | Usual model | Why |
|---|---|---|
| Incorporation + founder documents | Fixed | Standard, well-scoped |
| Term sheet review | Fixed | Clear, defined deliverable |
| EMI / option scheme setup | Fixed | Familiar process |
| SEIS/EIS advance assurance support | Fixed | Scopeable |
| Seed round (company side) | Fixed or capped | Scopeable, with a cap for overruns |
| Negotiated commercial contract | Hourly or capped | Depends on the counterparty |
| Dispute or litigation | Hourly | Genuinely unpredictable |
When is hourly the right model?
When nobody can honestly scope the work in advance. Negotiations depend on how reasonable the other side is; bespoke contracts turn on facts that emerge as you go; disputes can escalate or settle without warning.
Forcing a fixed fee onto that kind of work is a false comfort — the lawyer either pads the price to cover the unknown, or comes back to renegotiate when it overruns. An hourly rate is more honest, provided you control it.
Associates at startup and tech firms commonly charge roughly £250–£500 an hour, and partners £400–£800 or more. Regional and platform-based solicitors are often materially cheaper, so match the seniority to the difficulty of the task.
How do I stop an hourly bill running away?
Three habits keep hourly billing safe. Ask for a written estimate of total hours; agree a not-to-exceed cap; and agree how and how often you will be updated as costs accrue.
Read the engagement letter. Under the SRA's rules, your firm must give you clear costs information at the outset — scope, rates, and how you will be billed. A vague answer to "what will this cost?" is a warning sign, not a normal feature of legal work.
Finally, budget for VAT at 20%. A £4,000 hourly bill is £4,800 out of your account, and the estimate you were quoted may have been exclusive.
Worked example
Leena runs Brightpath Ltd, an edtech startup. She buys an incorporation and founder documents pack on a fixed £1,500 fee — £1,500 + 20% VAT = £1,800 — so she knows the cost before committing.
Later a supplier disputes an invoice, and the work is genuinely unpredictable, so her solicitor bills hourly at £320. Leena agrees a written estimate of six hours and a £2,000 cap before work starts. The matter settles in about five hours, costing roughly £1,600 + VAT = £1,920 — under the cap, and she was never surprised. Fixed for the known job, capped hourly for the unknown one: each model on the work it suited.
Where founders go wrong
Insisting on a fixed fee for unpredictable work
— you either overpay for padding or get a mid-job renegotiation.Accepting hourly with no cap
— always pair an hourly rate with an estimate and a not-to-exceed limit.Not reading the engagement letter
— it must set out clear costs information; that is where scope and rates live.Forgetting VAT
— every quote gains 20%, and estimates are often given exclusive of it.
Related questions
Is a fixed fee always cheaper than hourly?
Not always, but it is more predictable. A fixed fee prices in the lawyer's risk that the job runs long, so you may pay a small premium for certainty. On a well-scoped task that certainty is usually worth it; on genuinely unpredictable work, no honest lawyer can offer a fixed price anyway. [More: How much do startup lawyers cost in the UK?]
Which startup legal jobs suit a fixed fee?
Well-scoped, standard tasks: an incorporation and founder documents pack, a term sheet review, an EMI scheme setup, SEIS/EIS advance assurance support. Where the deliverable is clear and the process familiar, a competent firm can and usually will quote a fixed number.
When is hourly billing the right model?
For work nobody can scope in advance — negotiations that depend on the other side, bespoke contracts, and disputes. Here a fixed fee would either be padded to cover the unknown or renegotiated mid-job, so an hourly rate with an estimate and a cap is fairer to both sides.
How do I stop an hourly bill running away?
Ask for a written estimate and a not-to-exceed cap, agree how you will be updated, and check the engagement letter's costs terms. Under the SRA's rules your firm must give clear costs information, so a vague answer to "what will this cost?" is a red flag. [More: What questions should I ask a lawyer before hiring them?]
How you buy legal work matters almost as much as who does it — the right billing model turns an open-ended worry into a known number. A SuLe solicitor will tell you honestly which of your jobs suit a fixed fee and quote it up front, VAT included. Book a free 15-minute consultation
Keep reading: How much do startup lawyers cost in the UK? · How do I choose a startup lawyer in the UK? · What questions should I ask a lawyer before hiring them? · What is a term sheet review and is it worth it? · Do I need a lawyer for my seed round? · What legal work can founders safely DIY?
Primary sources: Solicitors Regulation Authority
