Paying Contractors Hourly - Is this a good idea?

[Sean Salandy]

I am in the process of interviewing contractors and I have had several contractors offer to work/get paid hourly. They are basically saying I can pay for the materials and they will get paid for the work based on the labor hours. I will also pay any sub-contractors directly for their work (not hourly in those cases). This seems like it could either save me money or cost me more in the long run.

Has anyone used this method of paying contractors? If I do decide to go this route, how can I avoid having the courts or the IRS view these contractors as my employees? Also, does anyone have suggestions on setting up a contract to have the contractor sign to ensure I am protected in case the work is not being done in a timely manner, quality, etc.? Thank you in advance.

[Matthew Paul]

The ones that offered to work hourly are not contractors . The ones  that  gave you a bid are contractors .  By paying hourly the person doing the work has no reason to get done . With the customer supplying the materials , there is no reason to " measure twice and cut once "  .  A true contractor will make great $$$ in an hour by giving a price for the job and supplying the materials , because he will work fast , efficient , and good because the faster the job is done with little waste  and no call backs the more he makes .  You are paying for skill , not time . 

Over the winter I had a customer that wanted an area cleared of vines , brush . It was about 1/2 acre .  Pretty good size , he wanted it all cut down .  He had tried a section himself and didnt get far . I gave him a price , $ 1200 . Wrote it down in detail .  He even told me He thought 2 guys would take a week to get it done . I told him probably a little less than a week . We got the job . ..................................  Show up 3 days later , tractor with a 5 ft bush hog , dump trailer and small chain saw . Got there at 8 am .  I call the customer at 2 pm to ask him a few questions to clarify 1 or 2 things , tell him Ok . Then I tell him its  done .  The customer tells me , " no way 2 guys did all that in less than a day "  So I tell him when you get home go look at it and give me a call "  I get a call around 5 and the guy cant believe it , and you did a section of my neighbor too ( $ 500 ) .  So i go pick up my checks . he asks how many people did I bring ? A whole crew ?   I said " no , just me"  and pointed to the road " and the right equipment ' 

Had I given an hourly price of $ 110 an hour , I would never gotten the job . If I did bid it by the hour , why should I move fast . By giving a flat price they knew what they were paying  .  So with loading , travel , unloading , 1 load to the dump I had 9 hours into the jobs , After dump fees , about $ 175 an hour .  Customers happy , contractor happy .