Billing for intern work when consulting

[turbo2ltr]

I (my company) currently does engineering consulting for another company (we'll call XYZ). For a long time it was just me doing the work and I billed them hourly at an agreed on rate. I have another employee that is now doing some of the consulting work. Due to the close relationship between my company and XYZ, the way it was initially set up is that even though my company employs the other person (an intern type position), I bill company XYZ a reduced rate for the work he does. There is a line item on the invoice for my hours at the full rate, and a line item for the intern's hours. He fill out an XYZ timesheet, even though XYZ does not pay him directly. The intern rate is higher than what I pay him, so I make a little there.

I'm looking to expand and get another employee as there is more work I could be picking up from XYZ. But I'm thinking I don't like the current billing setup. I just think XYZ has all the benefits of having an employee without any of the overhead. I mean when you hire a law firm, you don't get billed less because a paralegal did the paperwork, not an attorney, do you?

Just wanted to get people's thoughts/opinion, and maybe find out what the norm is for this kind of situation. I'm thinking I want to go to a single hourly rate. In the end I'm responsible for the quality of work that goes out, so how it gets done should not be XYZ's concern as long as it's right and done on time. But then do you still bill hour for hour at the higher rate when an employee does the work or do you say "well he doesn't work as fast as a more senior guy so I'll only bill .75 hours for every hour? Or am I just overthinking?

Thanks,
Mike

[Future of Edu]

Hey Mike,

Does your intern work on site? If you are billing them and they are paying you as a consultant then you should absolutely have a flat hourly rate. I've never heard of a setup like the one you have and I don't think I would agree to it. They wouldn't get that kind of treatment/offer from anyone else at any consulting firm.

Good Luck,

Nick

[turbo2ltr]

The intern works at my office (not XYZ). Thanks for the reply! I will politely notify them of the changes in billing method.

-Mike

[turbo2ltr]

Well notification of going to a single billing rate did not go over well with the client. They claim they and everyone else they deal with uses a rate table ranging from intern to principal. They will no longer use the intern we have. So now I don't have a clue what to do. Especially since I just hired a second intern.

Ahh isn't business fun!!?

[Paul E]

Many law firms do bill seperate rates for junior attorneys or paralegals. I pay that way often. the assumption is , as you said, the more senior attorney will accomplish more in hour than a junior or that the work will be of higher quality.

It seems you are stuck with the intern billing situation with xyz, but with new clients I would think you could make adjustments in your billing structure.

Paul E
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