Charging Hourly Rate for Incidental Work
However it's often a task where there are no materials or minimum materials and just the labor involved. For this I tell the customer I will charge cost of materials and an hourly labor charge. I give them an estimate of hours but alert them that it could take longer and I will be charging hourly.
The problem that has cropped up is that customers often freak out when they see my hourly rate at $80 Australian (and considering increasing it) in comparison other trades are charging between $50-$70 per hour however these other trades don't need to factor in the massive overheads that we deal with as cabinet makers. Itís often so rushed that I don't have time to explain all the details of my hourly rate nor do I enjoy explaining it to customers anyway. Sometimes I feel compelled to charge a lower rate essentially working for chicken feed when I could be doing more profitable things.
I am preparing a clause in my invoice terms and conditions stating that extra labor is charged at $80 an hour. Hopefully this will turn off the people who ask me to do anything and everything as part of their job and also give me something to reference later on if it goes pear shaped.
I am considering the following things and wondering what other companies do. Should I charge a flat rate of $80 for any employee or charge less for an apprentice (pending they are capable off the task)? Is there somewhere I should give an explanation as to why the rate is what it is and suggest that other labor is less expensive? (Keeping in mind I don't particularly like doing extras that don't align with my standard work).
A couple of thoughts based on some loose assumptions: First, I think you need to get over the distaste you have for change orders/additional tasks. If there's skilled woodwork to be done and you're the skilled woodworker that they've got a relationship with then of course you're going to be the person they go to, and of course it will be most efficient to do it while you're on-site for the main gig. Your clients can't foresee everything that they'll want done far enough ahead of time to get it all spelled out in a contract that might've been drawn up weeks or months earlier; changes are part of the deal for you.
If the extra work is in line with what you do then encouraging them to go to someone else whose labor is cheaper seems like a bad idea. It doesn't make sense for you because you're steering work towards your direct competitors, and it doesn't make sense for your customers because their time is valuable and it's simpler and quicker to just have you do stuff instead of finding someone else to do it.
Second, you should absolutely set expectations early by writing your change order/extra task policies into your standard contract template.
Third, you should give customers at least a rough estimate of how much each change will cost before you do the work. $80/hr is sure to sound scarier to someone who can't guess how many hours are going to be involved. Finally, stop trying to explain/justify your rates. When you do that, you are only giving your customers a way to argue with you. Your rates are what they are, and your overhead is not your customers' concern.
From contributor D:
Maybe you could simply use a clause that states all additional work beyond the scope of the contract will be performed by bid only. We don't bid the cabinets by the hour so why not avoid the actual hourly rate but just bid it like the rest.
From contributor T:
I liked Contributor J's response a lot. One additional thought is to put this hourly rate in bottom of the contract with all the other legalese. Ideally you don't have to use it, but you can always refer back to it. Personally, I use it for things that we don't want to do (appliance installation, etc.); but try very hard to include all cabinet possibilities in our scope of work. If additional work is added, I just make a new proposal and pricing.
From contributor M:
I would just provide a quote. I would never let out my hourly rate as it can be a can of worms. Site work is getting increasingly harder to justify if you do your own installs as you will always be compared to other trades, and more often now (in Australia) your opposition is using subcontractors for site work. Most clients donít understand that when you are on site you take a factory and all its contents with you.
From contributor O:
I get this thing a lot too. "Oh while your hear could you just... adjust this drawer or add a few peg holes to a cabinet, or these doors arenít aligned, could you fix them?"
If itís a small thing and I'm satisfied with the client then I'll just throw it in. Occasionally I feel that I'm doing a disservice to the trade, myself, and the client by doing this, but for me itís like the electrician being asked to "repair the light" when all it needs is the bulb changed. The problems start because some take this to mean your time is free or you donít need to work to earn a living.
My solution is either to decline the extra work or to charge for it an hourly rate sounds fair as long as the client knows in advance what your rate is there shouldnít be an issue. Contributor J gives some good advice ďstop trying to explain/justify your rates. When you do that, you are only giving your customers a way to argue with you.Ē
From the original questioner:
I really like what has been said about getting over having to do changes and additions - it's true it is part of the job. I also like what's said about laying down the rate and not trying to justify it. It is what it is. I have come up with a procedure to deal with this situation and it is pleasingly a hybrid of many points made. I have cut and pasted an excerpt of my terms and conditions that I have added regarding labor charges.
Here it is - additional labor: Wherever possible additional tasks are quoted and invoiced. However where additional labor is requested beyond the scope of invoiced work an hourly rate will be offered along with an estimate of time the task will take. As these tasks are often dependent on various factors tasks can take more time than estimated. Two options are available to limit extent of works.
1. A pre-determined maximum hourly cap can be set in place.
2. A progress report can be issued at time when labor hours are to exceed estimated hours.
Upon receiving this information client may decide what action is to be taken. So basically I'm saying Iíll quote the job wherever possible but if it's too ambiguous or small to bother with I'll charge the pre-determined hourly rate to do the labor and if it's going to be far over the time quoted I'll let you know and you can decide what you want to do about it.
Another key realization I have come across is that to avoid some of this pain I need to improve my screening of potential clients. I have two very similar jobs at the moment and the clients couldn't be more different. One wants everything straight away and doesn't appreciate the quality of the finished product or "above and beyond" work. The other is patient and appreciative. Amazing what difference that can make to your motivation and bottom line.
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