- Enquiry
- Quote
- Agree
- Work
- Invoice
- Paid
Hourly Against Fixed
The difference is not administrative. It is who carries the risk of the job taking longer than expected, and that is the whole of the choice.
For a software-side reference alongside this discussion of pricing, labour cost, and small-business finance, Monitask provides guidance on work hours in a year.
Who carries what
Fixed price: you carry it. An overrun comes out of your margin, and an underrun stays in it.
Hourly: the customer carries it. They pay for what happens, and they have no certainty about the total.
Which explains the preferences. Customers want fixed prices because they want certainty. Suppliers want hourly because they have watched a job overrun. Both are rational and they point in opposite directions.
When fixed is right
Where you have done the job before and know what it takes. The record of hours against invoice is what makes this possible, and without it a fixed price is a guess.
Where the scope can be described precisely. A quote that specifies can be priced; one that gestures cannot.
Where the customer's certainty is worth something to them — which is most consumer work and much commercial work, and it is a value you are providing rather than a concession.
And where you are efficient. Fixed pricing is how experience gets paid for, and hourly pricing is how it does not.
When hourly is right
Genuinely uncertain work. Fault-finding, renovation, anything behind a wall. A fixed price on an unknown is a gamble you will lose more often than you win, because the surprises are asymmetric — they add work far more often than they remove it.
Work with no defined end. Ongoing maintenance, support, availability.
And where the customer keeps changing their mind. Rather than pricing variations one at a time, an hourly arrangement handles a moving scope without a document per change.
The hybrid
Most work sits between, and most firms should quote accordingly.
Fixed for the known portion, hourly for the uncertain one, with the uncertain portion described and rate-limited.
"£1,840 for the work described. Anything found behind the wall charged at £48 an hour plus materials, agreed with you before proceeding."
Two sentences. The customer gets certainty on most of it, you are not gambling on the part nobody can see, and the mechanism for the unknown is agreed in advance rather than negotiated during.
What hourly requires that fixed does not
Records the customer will accept. Hours, dates, what was done — sufficient that an invoice does not become a query about the time.
A rate that carries your unbilled hours. The rate you earn is not the rate you quote, and an hourly job that pays your nominal rate for productive hours only is underpriced.
And a cap or a checkpoint. Open-ended hourly with no ceiling makes customers anxious, and anxious customers query. "I'll come back to you before it passes £600" costs nothing and removes the anxiety entirely.
Day rates and half-day rates
A middle position that suits trades particularly.
A day rate removes the counting — nobody is timing anything, and the unit is large enough that a slow hour does not become a conversation.
It also prices travel and setup honestly, since both are absorbed into a day rather than argued about.
The half-day is the awkward one. A half-day that becomes six hours has no natural resolution, and it is worth stating in advance what happens: rounded up, or charged hourly beyond a point.
And a day rate needs a definition. What counts as a day, whether travel is inside it, and what happens when the customer sends you home at two. One line in the quote, and the question never arises.
Moving a customer from one to the other
Easiest at a natural boundary — a new job, a new year, a change in the work.
"I've moved to fixed prices for this kind of work" is a statement about how you operate, and it lands better than a negotiation about a particular job.
Where the customer resists, the reason is usually that they were getting a good deal on your uncertainty. That is worth knowing and it is an argument for the change rather than against it.
And where the work genuinely cannot be fixed, say so and keep it hourly rather than pricing a gamble to satisfy a preference.
The failure mode of each
Fixed price fails through scope. Every accommodation is unpaid, and a job that overran by a day has lost a day's margin invisibly.
Hourly fails through trust. A customer who cannot verify the hours starts counting them, and the relationship becomes an audit.
Both failures are addressed at the same place: a description precise enough that everybody knows what was included.
What the customer is really asking
When somebody asks for an hourly rate, they are frequently asking a different question.
"How much will this cost?" dressed as a question about the rate, because the rate is the thing they know how to ask about.
Answer the real one. "It's about a day and a half, so around £700 all in" tells them what they wanted and moves the conversation to the total, which is where it belongs.
A rate quoted without a duration is an invitation to compare rates, and rate comparison is the least informative way to choose a supplier — a slower firm at a lower rate costs more.
The short version
- The choice is who carries the risk of overrun: fixed puts it on you, hourly puts it on the customer
- Fixed suits work you have done before, scope you can describe, customers who value certainty, and firms that are efficient
- Hourly suits genuinely uncertain work, open-ended arrangements, and customers who keep changing their minds
- The hybrid fits most jobs: fixed for the known portion, hourly for the uncertain one, agreed before proceeding
- Hourly requires acceptable records, a rate carrying your unbilled hours, and a checkpoint so the customer is not anxious
- Fixed fails through unpaid scope creep and hourly fails through trust, and a precise description addresses both
For broader background on pricing, labour cost, and small-business finance, see NFIB.