Kate Marchant, experienced HR professional and CIPD Associate Member, writes about the various things to consider when deciding what your HR consultancy rates should be.
So, you’ve launched yourself as an HR consultant! An exciting time, however, there is one dark art in need of mastering – what on earth should you charge?! How should you charge?!
Knowing what to charge for your services can often lead many a would-be HR consultant into a bit of a tizzy! It’s not as straight forward as you might imagine, yet it shouldn’t be over complicated nor too rigid – as you evolve and grow you may find you develop a niche or specialisation which is some way from your initial offerings!
In this article we will take a look at the different options around pricing plus the considerations you need to be aware of in determining your charges.
HR consultant rates - Behind the scenes thinking
In order to assist you with determining your prices, give some thought around the following:
- The breadth and depth of your own experience, how does it relate to the services you intend to provide?
- What type of service are you going to provide – retainer arrangements, one off project work, or a mixture of both?
- Are there any areas you specialise in e.g. change management, employee engagement?
- Why prospective clients should use you – this will help justify your rates, so what is your USP?
Another key consideration is defining the type of client you want to work with, for example:
- Are you looking at predominantly supporting SMEs without an HR department – do some research as to what level of HR support such SMEs typically require.
- Are you targeting a specific sector? For example; professional services, retail, hospitality or not-for-profit? Again, consider the level of support they might need and the budgets potentially available – an accountancy firm may have a larger budget than a not-for-profit organisation.
- Perhaps you are looking at supporting larger businesses who may already have an HR department – so perhaps supporting on project work such as redundancy consultation, TUPE, implementing new process/systems and employee engagement are a few examples.
- Maybe you are looking at a mixture of some of the above….
Let's talk figures
Having done some behind the scenes thinking around the type of service you are going to provide, your typical client and sector, the next step is to give some thought to the figures….
How do you do this?
What are you looking to earn? This might be an obvious question but most people will want a figure they aspire to. Also, you may need to consider this on an incremental basis i.e. targets for 1st, 2nd and 3rd years in business as most take time to grow. This is a more realistic approach as opposed to expecting to earn, say, 60k in your first year because that’s the salary you were on when you left the corporate world.
How many billable hours/days do you intend to work?
Remember as a freelancer you don’t get paid for holidays and sickness so you need to be realistic about the amount of time you need to spend working to achieve the income you are looking for. To get an hourly rate simply divide your target salary by your total billable hours.
A word of caution though, if you only ever charge by the hour, it can place a limit on how much you can earn each year. It is therefore a good idea to offer a set price for certain items for example:
- £500 for an employment contract and basic policy bundle (the bundle doesn’t always have to be the same – it will depend on what the business needs)
- £500 for a HR Toolkit (eg Redundancy toolkit which includes template letters and maybe up to an hour of advice)
- £700 for an employee handbook
- £150 for an employment contract template
Having items at a set price enables you to mix things up a bit and is an alternative way to sell your services to clients as opposed basing the cost on how long it takes, which is often harder to justify and can often end up taking longer than you first estimate! Once you set some prices for some packages, then you can supply them to businesses with a bit of adaptation which takes less of your time.
Furthermore, you may also want to consider working on a day rate, which may be more appropriate in the event you work on larger scale projects.
Be realistic with your HR rates
In the early months of setting up and, indeed, on an ongoing basis you need to be aware of the costs of running your own business. The amount of marketing required is often overlooked - after all, the work will rarely just be handed to you on a plate. As such, you need to build time, and therefore cost, to market your business. You will likely need to attend regular business networking events in order to build up connections and for other businesses to get to know, trust and recommend you. You may also need to consider building awareness of your services on platforms such as LinkedIn by posting regularly which, again takes time and will not earn you any money. So, you do need to factor this in as well as other costs such as professional subscriptions and networking group fees.
Ultimately, there is no one magical formula as it really depends on what you want to earn and how you want to earn it. It’s always worth keeping an eye on the competition and checking their charges out. Although remember that, often, clients want to work with you for your experience and unique selling points so what others are charging is not the be all and end all!
Read more from the myhrtoolkit blog
Written by Kate Marchant
Kate Marchant is an experienced HR professional and CIPD Associate Member who offers straight talking HR solutions for SMEs with friendly and jargon free advice through her consultancy Running HR Ltd.