In Australia, some trades and service providers charge a call-out fee for every job. Others stand by their ‘no call out fee’ policy and the extra incentive it gives customers to book with them.
At the end of the day, your business is your livelihood, so it’s only natural to want to cover your costs. But do call-out fees pay off in the end, or do they do more harm than good?
Though call-out fees guarantee a minimum profit margin for every job, there are also plenty of downsides, like potentially losing the client at the outset. Integrating call-out costs into a different pricing structure can increase customer satisfaction and forge a stronger client relationship. As there are many pros and cons of callout fees, the way you position and market your business influences whether a service charge will damage your sales process.
There is no right or wrong answer about whether to charge a call-out fee, but every business should make an informed and strategic decision about its pricing structure. Service businesses have a lot of operating costs to consider, like travel, equipment and ongoing licensing.
Finding the best way to bill clients involves striking a balance between the business’ financial interest and what appeals to customers.
To understand the ins and outs of service fees and whether you should charge one, take a look at our comprehensive guide below.
What Is a Call-Out Fee?
A call-out fee is a set charge a customer needs to pay for a tradesperson to visit their property, before additional costs for labour and materials are applied. Essentially, a call-out fee is designed to cover basic operating expenses and/or travel costs to reach the client’s home or workplace, ensuring a tradie is never left out of pocket on any given job.
A call-out fee can also refer to the amount customers need to pay for a professional to diagnose their problem or provide a quote.
What Does a Call Out Fee Cover?
What’s actually included when you pay a call-out fee varies from tradie to tradie. Some will include the diagnosis of a problem in the call-out charge, while others include a set amount of labour – such as fifteen minutes or half an hour of their time at no extra cost.
For others, call-out charges simply cover travel expenses and basic operating costs, and any actual time spent on the client’s job comes at an additional hourly rate.
Businesses report that their call-out fee is designed to compensate them for some (or all) of the following:
- Cost of maintaining brick-and-mortar premises, which can include rent, utilities, admin and bookkeeping fees
- Travel expenses, including time, fuel costs, tolls and vehicle expenses
- Knowledge, experience and training, which can also include licensing costs
- Initial diagnosis of a problem and providing a quote
- Insurance costs
Is It Standard to Charge a Call-Out Fee in Australia?
In Australia, there are no laws or regulations on charging call-out fees, although it may be considered deceptive conduct if customers aren’t informed in advance. Call-out charges aren’t regulated by any governing body and are not standardised, so whether a tradie charges for call-outs varies from business to business.
There are a variety of reasons why a service business might charge a call-out fee. Especially when the scope of repairs is unknown and the customer isn’t obligated to go ahead with the job, a call-out fee can ensure the travel time and diagnosis of the fault is financially worthwhile. Some tradies waive their call-out fee once a job is guaranteed, while others offer free call-outs but add a profit margin on materials and/or labour to cover their costs.
Other businesses only charge a call-out fee for emergency, short-notice, or after-hours call-outs.
Emergency and After-Hours Call-Out Fees
Naturally, unexpected and urgent visits to someone’s property are a dramatic interruption of a tradesperson’s time off, so customers expect to pay extra for public holidays or 3 am emergencies.
It’s important to strike a balance between compensating your staff (or yourself) for interruptions after-hours and giving clients what they perceive as a fair price. Particularly in crowded local markets, customers may choose an alternative business if the cost of emergency call-outs is too steep.
Listening to customer feedback and finding out what customers perceive as a reasonable emergency call-out charge is crucial.
Call-Out Fee vs Minimum Call-Out Fee / Minimum Charge
A minimum call-out fee or minimum charge is another strategy to avoid losing money when quoting a job. Rather than a separate charge to cover expenses, a ‘minimum fee’ sets a baseline under which the cost cannot fall, though the job is still billed at standard rates.
For these services, even if the job is completed much quicker, customers still have to pay the minimum charge. For example, say a tradie charges a $95 minimum fee, a cost that typically covers 60 minutes of labour. If the tradie is able to find the fault and fix the problem in only 20 minutes, the customer still has to pay $95, making sure the business breaks even on the call.
This is a common pricing strategy for lawn mowing businesses and other similar household services. Without a minimum charge, the revenue from a very small job could be below the operating costs of the business.
Pros and Cons of Charging a Call-Out Fee
Pros of Charging a Call-Out Fee
More Predictable Budgeting on a Per-Job Basis
Charging a call-out fee guarantees that you make a profit even just by coming down to see the job. Some tradies actually waive the call-out fee when they see the job and know there’s no chance of making a loss. Others will take the call-out fee off the cost of the work once the project is complete.
Either way, a call-out fee can function as an ‘insurance policy’ to keep each individual job in the green, rather than taking a ‘bigger picture’ approach to staying profitable.
Upfront Estimates Are Transparent For Clients
With a call-out fee, customers recognise that you’re upfront about your charges. There are plenty of anecdotes of tradies advertising free call outs, then charging higher rates on the first hour of labour, effectively doing the same thing without informing the customer.
Particularly when a call-out fee includes 15 minutes or half an hour of labour, customers know approximately what they’ll be paying for small jobs before they book.
Filters Out Low-Quality or Low-Value Leads
For businesses aiming to do exclusively high-end work, customers who baulk at the thought of a call-out fee may not be their target market. As a form of psychological pricing, this creates a financial barrier to hiring that company.
Quoting a high call-out fee is also a deliberate tactic some businesses use to discourage a job – maybe because it’s too small, the profit margin is too slim, or the location is too far away. Rather than turn down the job outright, they offer to do it at a very high call-out fee.
When it comes to your professional reputation, though, this kind of tactic can be risky. Being inconsistent with your call out fee policy can undermine consumer trust and send inconsistent messages about your business.
Cons of Charging a Call-Out Fee
Offputting For Customers and Damages Sales
The biggest disadvantage of charging a call-out fee is that you can easily lose a potential job altogether. When it comes to hiring trades and services, research shows Aussies are fairly distrustful when seeking the right tradesperson, and price plays a big part in people’s anxieties.
Prospective customers often baulk at the idea of paying for ‘just a visit’ with no guarantee the problem will ever be fixed or the work will ever be performed. From a business perspective, it makes perfect sense for operators to cover their base costs on every job – but it’s not easily understood by the same clients we want to build trust with.
Negative Impact on Reputation and Reviews
Neighbours, communities and networks are crucial to that word-of-mouth marketing that keeps local businesses busy. Offering free call outs is a big flashing sign that reads ‘great value’ to customers, and delivering value is essential to getting referrals.
Contrary to popular perception, value isn’t all about price, either. Most businesses who don’t charge a call-out fee make up the difference when charging for labour and materials, so it’s not about earning less income – but the way you present your fees can make a big difference in the minds of your clients.
To many people out there, call-out fees are a clear sign of a rip-off – even if that’s far from the truth. Perhaps they’ve had a past experience with a dodgy dealer, or maybe they just don’t really understand what the extra charge is all about. Whatever the cause, charging a call-out fee is a one-way ticket to a negative customer experience for these clients.
Unfortunately, customers are more likely to speak up with negative reviews than positive ones – meaning this unhappy camper is likely to broadcast how he feels about your business.
Damages Your Ability to Be Competitive
In a busy local service marketplace, it’s essential to look at the competitive environment when coming up with your pricing strategy. If you have local competitors that don’t charge a call-out fee, you may be entering the ring at a disadvantage.
Customers commonly look at price to distinguish competing businesses from each other. No matter how much effort you put into your marketing, dollars and cents still send one of the loudest messages to your audience. It only takes one or two persuasive competitors to drastically cut into your customer base.
You may be implementing a call-out fee policy to try and cover your own expenses – something that’s perfectly reasonable – but this can also put out the message that your business isn’t customer-centric.
Competitors who understand the psychology of customers often use a no call-out fee policy to their advantage. Even less experienced operators can ‘steal’ clients from established businesses with an appealing pricing strategy.
What Is the Average Call-Out Fee in Australia?
Call-out fees in Australia not only vary per state, but also depend on the individual contractor or business, so it’s quite difficult to get an average. Additionally, many tradies choose not to have a call-out fee, covering their costs through their pricing for labour and materials.
We’ve done some research on top-ranking Australian businesses and gathered some figures on typical call-out fees in Australia (other than ‘none’).
As an approximation, call-out fees in Australia fall around the following:
- Electricians usually charge around $50 to $90 + GST, including the first 30 minutes of labour.
- Plumbers will charge anywhere from $60 to $100 + GST.
- Gasfitters will charge a call-out fee of $100 + GST.
- Car mechanics can ask anywhere around $85 to $120 call-out fee + GST.
- Technicians may charge around $60 to $99 + GST.
These fees only cover work done during regular business hours. Expect the rate to be much higher when you call after-hours. For example, some technicians will charge somewhere between $155 to $180 for after-hours call-outs.
Other factors that will affect the call-out fee are travel costs, tolls, and the general supply and demand for tradies in the area. Customers in a hard-to-reach location or outside the usual service area can expect to have extra costs to cover.
Should I Charge a Call-Out Fee?
There are many factors to weigh up when choosing your pricing policy. Looking at other operators in your area, niche and price bracket – for instance, high-end and premium services versus those designed for everyday Aussies – can give you an idea of what works well with the target market.
When it comes to the competition, it’s important to note that Bizza franchisees do not charge a call-out fee. With over 4,300 franchisees across Australia, Jim’s has operators in over 45 different divisions. This includes handyman services, electricians, locksmiths, mobile mechanics, cleaners and more.
Whatever industry you’re in, there’s a good chance you’re competing with a Bizza franchisee and many more competing businesses with a no call-out charge policy.
It’s worth considering if a different pricing strategy could help secure more bookings, improve customer satisfaction and ensure your costs are covered at the same time.
Call Out Fee Best Practices for Tradies
If you do choose to implement a call-out fee, there are a few best practices you can follow to help smooth things over.
Notify customers of a call-out fee upfront (and in writing)
This isn’t just a recommendation – in fact, failing to notify customers that a standard fee applies is a sure-fire way to end up with complaints. It’s crucial to clearly state a call-out fee applies and how much the cost will be at every touchpoint, including on your website and during the initial phone call.
Hidden fees and charges are guaranteed to leave a customer unhappy, and you may suffer financial losses if they refuse to pay the bill. You may also be liable for deceptive conduct or pricing under Australian regulations, which is certainly no joke.
To protect your interests, always notify the customer that you charge a call-out fee, and give this information to the customer in writing.
Have a consistent call out fee policy
It’s best to have a consistent call-out fee policy so as not to confuse customers. It can be tempting to charge a call-out fee and then waive it if customers make a complaint. This can seem like a win/win scenario at the time, but can easily lead to perceptions of unfairness and damage consumer trust.
If you’re worried about excessive travel costs, it’s reasonable to charge a fee for work outside your usual service area. Consistency and predictability is the key.
Prepare to handle objections and lost bookings
Customers commonly take objection to call-out fees, particularly if competitors offer free call-outs or the job is fairly straightforward. In the current environment, many people just don’t expect to pay one, as contractors gain a better understanding of which pricing structures better communicate ‘value’.
If you choose to charge a call-out fee, ensure all staff handling customer enquiries are prepared to explain these costs to customers. You’ll need to be prepared for some difficult conversations. Everyone in the business should be on the same page, handling objections as politely and honestly as possible.
How to Calculate a Call Out Fee
There are many elements that go into calculating the right call-out fee, just like any decision on how to price your services. A call-out fee is usually between 60% and 100% of your hourly rate, but running the numbers isn’t enough to give you a solid pricing strategy.
You’ll also need to consider:
- your fixed costs for every job
- your overall profit margin across all jobs
- how much competitors are charging
- what customers expect to pay
- how any change in fees will impact the amount of work you secure.
Also consider your skills and experience, how long it takes to complete a job and what your standard rate covers – do you need to charge a call-out fee if your regular rates are more than covering your costs?
This is the crucial balance every pricing strategy needs to strike. Is it worth charging more if the number of jobs on the books decreases? How many leads are you converting to bookings, and how many customers decline due to unappealing fees and costs?
Assuming they still need the job done, these clients are bouncing straight to a competitor. Tracking these numbers and monitoring any changes can be a valuable source of information when it comes to making key pricing decisions.
Are Call Out Fees Legal in Australia?
Yes, it’s legal for service providers to charge a call-out fee in Australia. There is no governing body regulating and standardising call-out fees, either. However, businesses may run into legal trouble if they fail to disclose a call-out charge to customers in advance.
Can Customers Refuse to Pay a Call-Out Fee in Australia?
If the customer was aware up-front that a call-out fee would apply, legally speaking, the customer is obligated to pay the charge as agreed. Under Australian law, businesses have the right to set the price of their products and services.
However, if the customer isn’t informed about a charge or deceptive conduct is involved, they may have a viable legal claim. Informing customers in writing of any call-out fee or service charge is a wise strategy, giving you concrete evidence that the client was aware of the costs.
Are Call Out Fees Bad For Business?
Call-out fees can be offputting to prospective customers, and in practice, this can result in lost business. These charges are intended to provide greater financial security for tradespeople and prevent them from making a loss on certain jobs. However, the impact on customers’ decision-making can actually lead to a net loss when a call-out charge is introduced.
On the other hand, choosing an alternative pricing structure that integrates operating costs can lead to a better perception of ‘value’ from customers. The result can be improved customer satisfaction, converting more leads into bookings, and a reputation boost for the business.