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Flat Rate vs. Hourly Billing

Many residential HVAC service companies have chosen to switch from the traditional time and material billing method for service and repairs to flat rate pricing. The idea is that the customer is given a flat rate price for the repair upon diagnosis of the problem and knows what the bill will be regardless of how long it takes the service technician to perform. The reality is that flat rate pricing is designed to increase the level of gross sales and the profit margin of the contractor on a given job, not to save you money. Flat rate pricing contractors often charge a lower service (diagnostic) fee initially and charge more for repairs (see examples below). This also allows them to hide their parts mark up and actual labor rate from the customer avoiding having to disclose parts and labor costs on their bill. Often times the service technician is also paid a flat rate per repair, instead of hourly, and paid commission on parts or new equipment sales. Conflict Of Interests It is our belief that there is a fundamental problem with anyone in any service industry being compensated based on commission and/or flat rate wages. This essentially makes the service provider (technician, mechanic, doctor) a salesman, and any good salesman's goal is to sell you the most products and services possible. Instead of paying a well trained technician a fair hourly wage, the "technician" makes more money the more parts or equipment is sold, and the faster it is replaced. This is a direct conflict of interests in our opinion. Hidden Costs Another reason for flat rate pricing from the contractors perspective is the recent ability of homeowners to find some parts and equipment being sold online, often cheaper than contractors can buy them for at wholesale distributors locally. Parts and equipment mark up is a necessary part of a service company's profit margin and instead of being upfront about this, flat rate pricing attempts to obscure this fact.  Click here for more about buying HVAC parts and equipment direct online. We are not saying that all flat rate pricing contractors and technicians are unscrupulous, or that all contractors that bill on a time and material basis are always reliable and less expensive. We just want to make you aware of the differences and to know what to ask when considering a contractor for service or repairs to your home, or business, HVAC equipment. Don't be fooled by companies that appear to be less expensive based solely on their initial service fee or "labor" rate.  Ask first if they charge for repairs by flat rate or by time and material, and what the total bill would be for a hypothetical specific repair such as in the examples below. Most repairs on residential HVAC equipment can be diagnosed and repaired by a qualified technician in an hour or less. We believe that you should only pay for the actual time small repairs take, and pay a fair price on parts. This makes most reputable service companies' quoted hourly labor rates higher than others, but still usually results in a lower bill for the customer because there are no hidden costs. Even if the flat rate technician finds and corrects a simple problem quickly, their flat rate price book dictates the charge for that repair.

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