Assume the model's $185 blended project rate and its 50% project gross margin target. For a labor-only calculation, $185 × (1 - 50%) = $92.50 an hour available for direct labor. Set your IT consultant hourly rate against the cost and scope of the extra work before putting it in the client's agreement.
I'd give the client a clear rate schedule for work outside the monthly fee, with the minimum-charge rule stated beside it. First establish what the monthly agreement already includes. A published hourly rate cannot settle a scope dispute on its own.
Draw the Boundary Around the Monthly Fee
Say you serve a model-sized client with 20 seats at $225 each, or $4,500 a month. The agreement needs to identify what that fee buys. Compare a new request with that boundary before proposing an additional charge.
Out-of-scope work means work the agreement does not include in that monthly fee. Don't classify a task as extra merely because it took longer than expected. Check whether you're delivering the original promise, correcting your own work, or being asked for a separate deliverable.
Brian Largent describes a client disputing how a prepaid block of hours had been used when agent and maintenance work consumed it. He says his firm changed the packaging so support for the supplied agents was included in their fee, with customer-authorized reactive work handled separately. That is his account of a packaging change, and a useful reason to explain the boundary before time starts accumulating.
Keep routine included work under the monthly agreement. When a request is genuinely separate, describe the additional deliverable in the work order and point to the applicable rate schedule. The client should be able to follow the same distinction your billing owner will use.
Check the Rate Against the Person Doing the Work
Gross margin is the share of revenue left after the direct cost of delivering that work. The model's 50% project target means the relevant direct cost can consume half the revenue. It isn't a claim that half the invoice becomes business profit after overhead.
Compare that $92.50 allowance with the cost per productive hour of the person assigned. If the actual cost exceeds the allowance, the rate misses the target even when every billed hour is collected. Review the proposed rate and scoped work before quoting.
Use burdened pay, meaning salary plus the modeled employer cost, and account for the hours actually available for delivery. The US model uses a general salary burden factor of 1.25 and dedicated project utilization of 85% of 1,660 available annual hours. If the assigned person's role includes other duties, use a supported view of their productive time rather than borrowing the dedicated-project assumption.
As a labeled US model example, use a dedicated project engineer on $84,000 salary. Burdened annual pay is $84,000 × 1.25 = $105,000, and productive hours are 1,660 × 85% = 1,411. Divide $105,000 by 1,411 to get about $74.42 per productive hour, inside the $92.50 labor allowance. If the assigned person costs more or has fewer productive hours, recalculate; this example doesn't establish their cost.
Add other direct costs when the job requires them. A labor-only allowance cannot stand in for the margin on a package that also includes equipment or a subcontractor. Keep those costs visible before deciding whether to quote hourly or price a defined project.
Choose the Minimum Charge From the Work
The model supplies the blended rate but no universal minimum charge for ordinary extra work. I'd set a minimum only after identifying the actual delivery effort it is meant to cover. State how it applies so the client can distinguish it from the time estimate.
A minimum charge is the smallest labor amount billed under the agreed rule for the defined work. Specify whether that rule applies to an approved work order or another clearly named unit of service. Don't let the PSA create a fresh minimum each time a different technician touches the same task unless that is the charging arrangement you have explained and agreed.
Keep any billing increment separate. An increment describes how billable time is rounded, while a minimum describes the smallest charge. Have the billing owner show how the two interact before approving the schedule.
For a schedule with an agreed minimum and no separate rounding rule, calculate the labor charge by multiplying the hourly rate by whichever of these is greater:
- Recorded billable hours for the approved work.
- The agreed minimum billable hours.
Identify approved non-labor charges separately.
For an illustration only, suppose the client has agreed a 1-hour minimum for an approved task that takes 0.5 billable hours, with no separate rounding rule. The greater amount is 1 hour, so 1 × $185 = $185 of labor charges. Those assumed hours demonstrate the formula; they aren't a recommended minimum or an estimate for your client's task.
Use the client's actual approved scope to test the formula. Enter the chosen minimum and the expected billable effort, then show the resulting charge before work begins. The formula isn't permission to bill time that the monthly plan already covers.
Put the Charging Rule Beside the Rate
Give the client a schedule that can be used without a second pricing conversation. Have the account owner explain the commercial terms and the billing owner confirm the PSA can reproduce them. These are the fields I'd require:
| Schedule Field | What to State |
|---|---|
| Covered extra work | Identify the work categories and their boundary with the monthly plan. |
| Hourly rate | State the applicable rate, currency, and any different rate for an explicitly defined service. |
| Minimum and increment | State the unit the minimum applies to and any rounding treatment. |
| Approval and estimate | Identify who may authorize the work, the estimate, and when further approval is needed. |
| Other charges | Explain approved travel or other direct charges and their treatment. |
| Timing and reference | Record the schedule version and effective date and attach it to the work approval. |
Handle an after-hours arrangement explicitly if you offer one. Record which work and service window it concerns, then state the applicable charging rule. The model's employee call-out pay assumptions do not set your client invoice or an ordinary daytime minimum.
Keep the schedule version with the work order. If you later revise the rate, establish how that revision applies under the client's arrangement before using it on an invoice. A newer price list isn't a time machine.
Send the Same Approval to Delivery and Billing
Erick Simpson distinguishes an unrelated support request during a project from a change to that project. He recommends routing unrelated work through the ordinary ticket and agreement process, while recording project changes separately even when the MSP chooses not to charge. That is his project-control suggestion.
Use that distinction when the engineer receives a 'while you're here' request. The project lead checks which agreement owns it before scheduling extra work. An included support task should not acquire an hourly charge simply because a project engineer heard it first.
For approved extra work, send the scope and charging rule to the engineer and the billing owner together. Record actual labor even where you decide to absorb the charge. Have the person authorizing that concession name it in the record so finance can distinguish goodwill from an unbilled item.
Take a current monthly agreement and test a realistic extra-work request against it. Confirm the boundary, calculate the charge under the chosen rule, and check that the approval reaches the person who invoices. Then put the rate and minimum in the schedule the client will actually use.
mspoutpost.com/articles/set-an-it-consultant-hourly-rate-for-extra-msp-work
Written by Graham Whitfield
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