If your organization is ready for a consultant and you’ve found one that is a good fit for your project, the next step is getting a contract in place.
At this stage in the hiring process, you should have a good sense of the scope of work, deliverables, and timeline. But what you may not have thought through yet are the payment terms.
Here are 3 of the most common options for consultant payment in the social sector. They aren’t mutually exclusive, and may be combined to create the right payment structure for you and your consultant based on the project.
- Hourly or Daily Rates
In this option, time spent by the consultant on the project is charged at a daily or hourly rate. Additional costs related to the project (for example, travel) are usually billed as incurred or based on agreed upon rates.
Pros: You know exactly what you are paying for and can track project costs for future reference.
Cons: If the project takes more time than anticipated, the costs can add up beyond what is budgeted. Consultants also work at different paces and clients engage on different timetables; so, there is more likelihood that one party (client or consultant) may be unhappy with the arrangement. For these reasons, this model is less popular and mainly used for short-term activity-based projects.
- Fixed-rate or Flat fee
In this option, you work with the consultant to agree on a total price based on a detailed scope of work, clear deliverables, and estimated costs for the project (including their time). This sum is usually paid in installments based on project milestones/deliverables. For example, a portion when the contract is signed, a portion when a key milestone is reached, and a portion upon completion. This is the most common type of payment structure, since it protects the client since she knows exactly what she’ll pay and protects the consultant as she knows exactly what works she’ll be doing.
Pros: Scope of work is clearly defined and deliverables are guaranteed for a fixed price.
Cons: If there are unexpected challenges or changes in scope of work over time, there may need to be an addendum to the contract.
- Retainer
In this option, a consultant is paid a monthly or other regularly scheduled fee to provide a predetermined number of hours of services.
Pros: This is a great option if you know you will need a consultant on an ongoing basis to provide subject matter expertise on a variety of projects. You can build a partnership with a consultant that gets to know your organization very well, is trusted, and has dedicated time for you.
Cons: Although this can be a very beneficial model, it requires planning and foresight to identify where and how it can be valuable.
Once you have determined the right payment terms and have a contract in place, make sure you take these 5 steps to ensure a successful start to your consulting partnership.
