There is a lot of debate these days regarding how service companies and especially plumbing companies charge their customers. Most people are used to T&M (time and material) but many companies in the industry are beginning to charge by the job not by the hour. They may call it, up front pricing, flat rate pricing, or menu pricing. Whatever it is called it means the company will tell you before any work is performed exactly what your charges will be and ask you to approve the work before they do it.  What’s going on here? Have these companies figured out a way to stick it to the customer or is this really a better way to charge for both the customer and the company? Let’s take a look at each.

T&M is how plumbers traditionally have charged for their service. It implies that what the customer is getting charged for is the plumber’s hourly wage and the material he used while performing the service on your system. On the surface this seems like a good and fair way to charge. The reality is, and any business owner will tell you, there is much more to the cost of running a company then simply the employee’s hourly wage and some material. In fact those two items add up to only a fraction of the costs a business will have. So a company only charging to cover those costs probably won’t be around the next time you need them. T&M charges by their very nature can’t be presented to the customer until after the work has been completed. So the customer is on the hook for the work but with no commitment from the company as to cost. What other consumer product do you buy that requires a commitment to pay before the company will tell you the price? T&M favors the inexperienced plumber who will need to take longer to perform a task. A plumber not feeling well and therefore working slow will actually make more money. The experienced technician who is capable of efficiently dealing with your plumbing issues in less time will be penalized for that ability.   

So is up front pricing better? True up front pricing is not pulling numbers out of the hat. There are many computer programs available for sale that provides data on just about any situation a plumber can get into. The individual company then feeds into the program its own overhead costs and profit margin desired. The result is a book that takes into account what the company needs to charge and what is typically required to perform a specific work for a fair price. These programs are amazingly accurate. With this way of pricing an experienced, efficient plumber is not penalized if he does a job for you at the best of his ability. The less experienced person does not get to charge you more because it takes him longer. Pricing is systemized so the company can more closely monitor the employees and be sure the customer is being treated fairly. The reality is that T&M has some significant disadvantages not only to the business but more importantly to the customer. Can up front pricing be abused? Absolutely, management must monitor the technicians in the field closely. By presenting a price for customer approval before work is done and requiring your approval to proceed it is much harder to abuse the system then if one is expected to commit to the work first and discuss price later.

Whether one charges by the hour or by the job I believe most people are just trying to earn a living in an honest and moral way.  Given a choice though, I will always choose to know the cost before I buy the product.