Pros and cons of paying Hourly vs. fixed price in the world of tradesman

In the world of building and maintenance, you have 2 options of payment with a possible third: fixed price, hourly or do-and-charge.

A fixed charge is a set amount quoted prior to completing the job that has a set scope.

An hourly rate is a set rate charged by the hour, agreed by the trades company and the customer before going ahead with a job.

A do-and-charge is where a tradesman is given the approval to do work up to an agreed dollar value based on fixed rates, anything above this value needs to get further approval.

Each has its own pros and cons and is always a question we get thrown our way from time to time. See below for the pros and cons of each option:

The benefits of a fixed price are that you:

  1. Know the costs up front and can budget for that price
  2. You have locked in a price regardless of the increase of product prices, their service costs, or estimated time
  3. You have a written contract for your trade technician to follow through on
  4. If it’s an urgent job a set price could be more beneficial price wise

Cons of a fixed price

  1. Without contacting every other trade in the market and making sure they all got back to you with a price you have little or no knowledge of whether that price is the best price for the job
  2. On the flip side of locking in a price, you have locked in the price regardless if the product/supply and services costs decrease
  3. By locking yourself into a contract you are legally bound to proceed regardless of problems that are unforeseen like poor communication and quality of work

Pro’s of Hourly rate

  1. You only need to pay for the hours they charge plus costs of supplies
  2. The negotiated hourly rate could be less than a fixed price

Cons of an hourly rate

  1. The job could take longer than initially estimated causing an open-ended expense
  2. They could work slower to increase the end bill

Pros of do-and-charge

  1. You know that no job will go over a certain value
  2. The job is never held up by cost restraints
  3. You have peace of mind that your tradesman will get the job done without bothering you for cost unless it’s going to be over the agreed value
  4. Works great if you are managing multiple facilities and are

Cons of do-and-charge

  1. You never know whether it will be less than the agreed value
  2. A lot of trust is required between both the client and trade technician for this to work if you have a company who don’t hold their team accountable to the hours spent on a job

If anything, it pays to do your homework and research your trade technicians before getting them on board. Check out this checklist on what to look for trades

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2019-09-09T16:17:03+10:00
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