How should an HR consultant charge for services?

There are several ways an independent HR consultant can charge for services:

• An hourly rate/fee. Some consultants may stipulate a minimum number of hours (ranging from two to five) when using this option.
• A daily or half-day rate/fee depending upon the nature of the assignment.
• A project rate or fee to handle longer-term assignments such as writing an employee handbook or developing a performance management and appraisal process. The consultant may establish a list of deliverables or milestones for a long-term project and bill the client when a milestone has been reached instead of waiting to be paid when the project is completed. These terms are usually outlined in the written contract describing deliverables and pay arrangements, including the ability of the client or consultant to alter the terms of the contract if necessary.
• A retainer, which is an upfront fee the client pays in order to reserve a specific date or contract. Retainers may also be used in conjunction with any of the above pay arrangements.

When charging by the hour, by day/half-day or by project, a consultant may add out-of-pocket expenses, such as travel and lodging outside the consultant’s home base or site visits. These charges and their reimbursement (e.g., based on actual or reasonable costs or on the current federal government rate) are often more subject to negotiation than the basic charge proposed by the consultant. When setting a price, an HR consultant will also need to factor in how his or her rates compare to local and regional practices and what clients are willing to pay based on their budget, their industry and the perceived value the HR consultant provides.

The more specifically the fee structure and expense reimbursement are spelled out in a formal written contract, the less confusion there will be in billing and payment during the consulting relationship. A sample consulting services agreement is found here. More advice on setting fees as well as on becoming an HR consultant can be found in SHRM's Toolkit: Introduction to Consulting.