At a glance
- Flat rate
- One price for the task, set before work starts
- Hourly (time and materials)
- Hours worked times a rate, plus parts
- Best for flat rate
- Repeatable service and repair work
- Best for hourly
- Unknown scope, diagnosis, remodel surprises
- Most service shops use
- Flat rate from a price book, hourly only for exceptions
Prices and rules change. Verify every item with the vendor or agency before you rely on it.
Short answer: Use flat rate for repeatable service and repair work: the customer gets one price, a fast tech earns more per hour, and your price book does the selling. Use hourly, or time and materials, only where scope is unknown. Most small service contractors end up flat rate with a written hourly fallback.
Updated October 12, 2026. Requirements and fees change; confirm with the agency named on this page.
Every new contractor asks this in the first month, usually after a job that took twice as long as quoted. The honest answer is that both work, both can lose money, and the choice depends on how predictable the job is. Here is how to decide, and how to make either one pay.
What is flat rate pricing?
One price for the task, quoted before work starts, from a price book. The customer knows the total before you touch anything. If your tech finishes faster, you keep the difference. If a job runs long, you eat it. The flat rate software vendors sell exactly this: The New Flat Rate describes itself as "flat rate pricing software with built-in menus for HVAC, plumbing, electrical, and chimney contractors."
What is hourly, or time and materials, pricing?
You bill hours worked times a rate, plus materials at cost or with a markup. The customer pays for what it took. It is fair when nobody can know the scope up front, and it protects you from surprises. It also makes every invoice a negotiation about how long things should have taken, and it punishes your best technician: the faster they work, the less you bill.
Where flat rate loses money
- A price book built on guesses. If the hours behind a line are wrong, every job on that line is wrong. Build it from your real labor cost.
- Scope creep without a change order. Flat rate needs a written rule: anything outside the quoted task gets a new price before it starts.
- Stale prices. Materials rise, your book does not, margin disappears a few dollars at a time.
Where hourly loses money
- A rate that only covers the wage. Your hourly rate has to carry payroll taxes, workers’ comp, insurance, the truck and overhead. See how much to charge per hour.
- Unbilled time. Driving, supply runs and the ten minutes writing the invoice are real hours nobody pays for unless the rate assumes them.
- Disputes. Customers who see hours argue about hours. They rarely argue about a price they approved first.
Which one should a small contractor use?
For service and repair work with repeatable tasks, flat rate. It is what the customer wants, it lets a non-owner tech quote without calling you, and it rewards speed. For diagnosis, remodels with hidden conditions, and anything you cannot see before you open the wall, hourly or a diagnostic fee first, then a flat price once the scope is known. Our service call and diagnostic fee guide covers that first step.
How to switch from hourly to flat rate
- Pull your last 50 invoices and group them by task.
- Average the hours per task, then price each one from your loaded hourly cost, materials and margin.
- Write a one-line change order rule and put it on every quote.
- Keep an hourly rate on paper for the jobs that do not fit a line.
- Track actual hours against book hours for 90 days and fix the lines that miss.
Whichever you choose, run the number through the job margin calculator before you quote. A price is only good if it leaves margin after everything is paid.
Prices checked October 13, 2026 on each vendor’s own pricing page. Vendors change prices and plan names without notice; confirm before you buy.
This guide is general business education, not legal, tax or financial advice. Your numbers come from your own books.
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Common questions
Is flat rate or hourly better for a plumber?
Flat rate for most service and repair calls, because the task is repeatable and the customer wants one price. Keep an hourly rate for diagnosis and jobs with unknown scope, and quote a flat price once you can see the work.
Do customers prefer flat rate pricing?
Usually. A price approved before work starts removes the argument about how long the job should have taken. The trade-off is on you: the price book has to be built from real hours and real costs or you lose on every line that is wrong.
Can I use both flat rate and hourly?
Yes, and most small shops do. Flat rate from the price book for standard tasks, and a written hourly or time and materials rate for work outside the book. Put the rule on the quote so the customer sees it before you start.
Sources
Official pages checked on 2026-10-12.