Fixed Rate Pricing – How does it work? What are the benefits?

(Our Manly article – April 2010)

We’ve all heard of and experienced the traditional method of being charged by the hour i.e. your tradesperson attends your property, conducts the works required and invoices you at the conclusion of the job for their labour plus any materials or equipment used. Most of the time a client will be completely happy with the final cost (particularly if they received prompt and quality service and workmanship). Other times they might not have expected the final bill to be quite that much (even if the service and workmanship were outstanding).

Fixed Rate Pricing can eliminate many problems as clients are provided with a quote before work begins. Basically, you are charged by the job not the hour. A tradesperson will attend your property and investigate and determine the works required. They will then provide you with a fixed price for your job (before work commences). Once complete, you pay the fixed price. You are completely aware, before work starts, exactly how much the job will cost. There are no hidden surprises and you have complete peace of mind.

Now, we aren’t saying there won’t ever be any additional costs added to the ‘fixed price’ because sometimes it is just unavoidable. For example, a variation may be required for items that cannot be visually seen such as rock, damaged wiring or other services. Unfortunately a tradesperson cannot reasonably assume the above instances unless they can visually see what is there (and the only way to be certain is to dig up the ground to ensure there is no rock or other services, or remove gyprock from your walls to conduct a thorough investigation of the wiring throughout the property). It would be extremely unfair and unreasonable for your tradesperson to automatically allow for all possible variations within your fixed price. Instead, it is fair for them to provide a fixed price based only on what they can see, and if the unseen becomes an issue, they then provide you with a variation to your fixed price – the moment the variation becomes apparent. This ensures you aren’t being charged for something that might not even happen.

Fixed Rate Pricing has become more popular in recent years with the trend moving towards clients wanting to know how much their job will cost before they make a decision. This is extremely reasonable – after all, you don’t have a new washing machine delivered and installed and find out afterwards how much it is going to cost. From a tradespersons point of view, it is extremely attractive as it can minimise any disputes between the client and the tradesperson simply because the price is determined and agreed before work begins.

Most tradespeople also charge a service call (in addition to the fixed price) because they value their time and expertise. When they attend your property to provide a fixed price, they have to use their experience and qualifications to work out the best way to complete your work according to Australian Standards. After all, if you didn’t need their skills and knowledge, you would just do it yourself.

So, what are the benefits of Fixed Rate Pricing?

  • You have a guaranteed price of what the works will cost before they are started.
  • You have peace of mind that you can afford the works and you won’t be given an unexpected bill at the end.
  • If the job takes longer than expected, you won’t be charged anything extra – just the fixed price amount (unless there are pre-discussed variations).
  • Your tradesperson will be efficient as they won’t benefit if they are slow and waste time.
  • If you have other things to attend to, you can pay for the works as you already know the final cost.
  • It minimises disputes between clients and tradespeople as everyone is aware of the final cost prior to any works commencing.
  • Clients receive a detailed description of their works and will generally sign to approve acceptance of the ‘fixed price’, terms and conditions and commencement of works.

There really is no right or wrong way. It comes down to personal choice and what you feel comfortable with. If you already have a plumber, electrician or other tradesperson that charges you by the hour and you are 100% satisfied with that, then there is no reason to change. But, if you prefer to know exactly what a job will cost before it starts, then obtain a fixed price from a reputable and licenced tradesperson.

General Advice Disclaimer: Every home is different and this general advice may not be suitable to your specific circumstances. Please consider whether this general advice is suitable for you. In the case of any reasonable doubt we recommend that you seek our expert advice about your specific circumstances before acting on the general advice set out above.