Why are HR consultants so expensive?

Hi Bare Bones Consulting, we’re a small business needing help with employment on an ongoing basis. I’ve called a number of companies for help…why are HR consultants so expensive?

Hi back at you and thanks for your question…it’s a fair one to ask!

There’s little argument that using a consultant in any field can be expensive. Clients often look at the hourly rate quoted by a consultant and are under the impression the consultant earns this figure 38 hours per week, week in and week out. Unfortunately for we consultants (especially those of us who are self-employed), this impression is not entirely accurate.

What factors influence the setting of a consultant’s hourly rate? Typically, 4 factors:

1. Experience
2. What the market will bear
3. Billable vs non-billable hours
4. The cost of not doing business

Let’s break each down a little more.

1. Experience

One key factor in determining consulting fees is the experience of the consultant. Quality HR consultants typically hold tertiary qualifications in Human Resources, have worked at HR Manager-level for a number of years and have a track record of success with clients as a consultant. That combination of experience and expertise comes at a premium.

2. What the market will bear

“What the market will bear” refers to a pricing strategy where a good or service is priced according to what customers are willing to pay based on its perceived value, rather than its cost.

Obviously, the hourly rate a consultant intends to charge (no matter how good they might be) cannot be in excess of what customers are willing to pay, otherwise no one will use their services.

At Bare Bones Consulting, we price our services based not only on our direct HR experience and the results we know we can deliver, but at a level we consider affordable to the largest segment of our clients: those in small businesses.

3. Billable vs non-billable hours

In consulting-world, billable hours are those spent on client-related work that can be invoiced and directly generates revenue, while non-billable hours relate to time spent on internal business operations that are not directly charged to clients. While non-billable hours don’t directly bring in dollars, they are crucial for the viability of a consultant’s business. As a HR Consultant, non- billable hours include:

• Drafting HR document templates and keeping these up to date
• Pitching HR services to new clients
• Short calls with clients that are not charged
• Invoicing and processing payments
• Internal marketing activities such as blogs, client mailouts and SEO activities

4. The cost of not doing business

I consider myself fortunate to have enough clients so that my billable work is relatively consistent. But it hasn’t always been this way. As a consultant, it takes time to build up a client base and, while you’re in this building phase, there’s a lot of time when there simply isn’t any work: great for work/life balance but not so much for putting food on the table.

Unlike a traditional employee – who gets paid irrespective of being busy or not busy – consultants make nothing when there’s no work coming in so most factor an “inactively loading” into their hourly rate to compensate for the time when they’re not doing paid work. 

Bottom line?

There’s little argument using a HR consultant comes at a cost. A consultant’s rate factors in their experience, non-billable time, the risk of inconsistent income and overheads for maintaining the consultant’s brand and operations.

Fortunately for business owners, there’s no shortage of HR consultants out there. While there’s little argument every dollar matters, what you might also consider is value when engaging a consultant: someone with the experience to tailor cost-effective solutions to your HR challenges, ensure you’re compliant with your lawful obligations and help you make the right decisions so you can focus on the things that really matter to you. Like to know more? Call us for a chat.