Page 20 - Law Society of Hong Kong MPMC Manual v8 - With checklists (1 March 2018)

Practice Management Course | Unit 2
Financial Management

58. This is why Hours x Rates x Heads is an insufficient formula with which to make the
best decisions. The costs of additional fee earners must also be assessed, and the
ability of the practice to consistently provide the necessary work for the additional
revenue to be made, must be considered when deciding whether to increase
leverage and the Full Time Equivalent (FTE) employment count of a practice. The
FTE count is method of counting employees on a consistent basis. It takes into
account of the total number of hours worked by all employees and divides that
number by the number of hours that a full-time employee would usually work.
Effectively, this requires all part-time employees to be recorded as having an FTE
equivalent (e.g. a person who works 3 days a week is recorded as a 0.6 FTE). An
FTE count is a better indicator than a payroll headcount, which will simply count the
number of employees, rather than how many hours are worked.

Anti-competitive behaviour
59. Finally, a reminder not to engage in anti-competitive behaviour when setting fees
or in any business dealings. The Competition Ordinance (Cap 169) prohibits
restrictions on competition in Hong Kong through two competition rules. These are
found in Part 2 The Conduct Rules of the Competition Ordinance (Cap 169):

i. The First Conduct Rule prohibits anti-competitive agreements, concerted
practices and decisions.
ii. The Second Conduct Rule prohibits abuse of market power.

60. The First Conduct Rule prohibits all arrangements between solicitors and firms (whether
they are competitors or not) which prevent, restrict or distort competition in Hong Kong. For
example, it prevents competitors from colluding on things such as price, output or how they
bid for work.

61. The Second Conduct Rule only applies where a law firm possess a substantial degree of
market power. It prohibits such firms from abusing that power, with a view to protecting or
increasing their position of power and profits.

62. For further information on the Competition Ordinance (Cap 169), including examples of
prohibited practices, go to the website of the Competition Commission:
https://www.compcomm.hk/en/practices/what_is_comp/overview.html

Reflection questions

How to use the reflection questions
These questions have been designed to help you reflect on the material in the unit and check your
understanding of some key themes and concepts. Completing them is optional, but we encourage
you to take the time to do them to help reinforce what you have read and highlight any areas of
uncertainty. If you are uncertain about the content covered in the reflection questions or your
answers to the questions, it is a good idea to raise a question during the workshop.

Reflection questions for Unit 2
(1) What are the three main methods for building a fee budget?
(2) Do you use timesheets in your practice? How do you ensure that you account for all
billable time?
(3) What are three common pricing strategies?
(4) How can WIP and debtor conversion be optimised?

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