Read on to make a well-informed decision by telling you which one is better for your company’s needs.
One of the dilemmas small and medium companies would have to face when outsourcing certain services is deciding on whether to pay the skilled professionals for hour-based work or for results-based work. Each billing method has its own share of pros and cons, and as a client, you have to carefully weigh them all for you to determine which will work best for you and your freelancers.
More often than not, the nature of the job you want to outsource primarily determines whether you should bill by the hour or by the results. Here are the advantages and disadvantages of these two billing systems when outsourcing tasks:
Billing by the hour
Some service providers are tempted to bill by the hour because it allows them to transfer the risks to the client if ever the task assigned to them takes longer to complete than expected. On the other hand, if they are too experienced for the task, they may feel that they are underpaid as they can excellently pull it off in shorter period and just bill small number of hours.
Clients can take advantage of hourly billing by making sure you assign the tasks to the workers who are knowledgeable and capable enough of completing it in the smallest amount of time possible. Be mindful though, as your workers may tend to procrastinate especially if you don’t have a way to track what they’re doing every minute. It is, in fact, one of the reasons many clients and service providers prefer results- or performance-based billing.
Billing results-based work
Compared to hourly billing, this one’s a win-win situation for both the clients and the service providers. The former will get their money’s worth as they will pay their service providers according to their performance or to the quality of their output while the latter will carry out the project more competently knowing that they will be paid by the value they create or the difference they made through the application of their ideas and skills.
By billing results-based work, clients are more likely to find and keep knowledgeable and experienced workers. Procrastination will also be out of the equation because workers know that they will be judged and compensated according to the results of their work, which means if they put off tasks, then they may receive lower salaries. Depending on your company and the tasks you will outsource, you can implement various results-oriented strategies to improve your and your workers’ efficiency.
Contact TukkoLabs today and we’ll show you how we can help your company be more productive and efficient.