Owners of service businesses, such as agencies, accounting firms, consultants, installers or system developers, must choose how to price from the first quotation: a fixed price for the whole job, an hourly rate or a monthly fee. Each changes the risk and the cash flow of both sides and, importantly, changes what the contract has to say.
The real problems usually appear when a client asks for endless revisions under a fixed price, asks where this month's unused hours went, or demands the deposit back after cancelling. This guide covers pricing from the angle of what has to appear in the contract. It does not cover a law firm's own fees, which are discussed in factors in quoting a monthly legal retainer.
The core answer
No pricing model is best for every job. Choose according to how clear the scope is: a clear scope suits a fixed price, an uncertain volume suits hourly, and continuing regular work suits monthly. Whichever you choose, the contract must state the scope, how changes are requested, the delivery criteria and how money is claimed.
The rule (Thai law). Section 377 of the Civil and Commercial Code provides that anything given as a deposit is evidence that the contract has been made and a security for its performance. Section 378 sets out the principles on return, application to part payment and forfeiture of a deposit, where the parties have not agreed otherwise. Separately, value added tax and withholding tax on service fees follow the Revenue Code and depend on registration status and the payer.
Our practical view. A wrongly set price is usually fixed with a better contract, not by renegotiating every month. Write down before the work starts what the price includes, what it does not, and how extra work is charged, and use a written change request every time.
1. Choose the pricing model by the nature of the work
| Pricing model | Suits | Provider's main risk | Client's main risk |
|---|---|---|---|
| Fixed price | Clear scope and result | Overrunning time and endless revisions | Low-quality work if the provider cuts costs to hurry |
| Hourly or daily | Uncertain volume of work | The client caps the budget or disputes the hours | Budget overruns it cannot control |
| Monthly | Continuing work, maintenance, advice | The client calls on more than intended | Paying even in a month it did not use the service |
| Mixed (set-up fee plus monthly) | Work that must be installed and then looked after | The two phases must be kept clearly apart | A commitment longer than it expected |
When a business wants to move from one-off work to regular income, see from one-off projects to monthly revenue. To choose work for its real profit, see more work, less profit.
2. Fixed price: the scope is the price
A fixed price does not buy everything the client has in mind; it buys the work that is written down. Problems arise when "as we discussed" or "until the client is satisfied" is the scope. Write it as follows.
- Deliverables. List as items what will be delivered and in what form.
- Criteria for completion. For example, passing an inspection against a list, or no objection within a set time.
- Number of revision rounds included in the price. Beyond that, charge at the agreed rate.
- What the client must provide. Such as data, documents and approvals, within how many days, and the effect of client delays on the delivery date and on claiming payment.
- Exclusions. List the things that are often wrongly assumed to be included.
Sample wording on revision rounds (adapt to the actual work)
The price under this contract includes revisions in response to the Client's
comments up to the number of rounds stated in the quotation. For revisions
beyond that number, or changes outside the scope of work, the Service Provider
will give a written estimate of the additional fee and will start work once the
Client confirms in writing.
When a contractor carries extra work with no paper trail, it is hard to prove the client agreed to pay more. See more work, less profit.
3. Hourly: time records and a budget frame
Hourly pricing looks straightforward but is the model that produces the most disputes about evidence.
- How time is recorded. Who records it, in what system, and the minimum increment (for example fifteen minutes or half an hour).
- Reporting to the client. Send a weekly or monthly report, and set within how many days the client may object, after which the report is treated as accepted.
- Maximum budget and warnings. Agree that when hours reach a set proportion of the budget the provider must give notice before continuing.
- Urgent and out-of-hours work. The special rate, and who approves it.
- Travel time and reimbursable expenses. State whether they are charged and what evidence is needed to claim them.
The provider should keep time records and the emails that gave instructions, because if the client disputes the total, the records are the main evidence.
4. Monthly: what exactly is being bought
A monthly package has two different meanings, and the contract must choose one.
- A fee for being available. The client pays so that the provider reserves people and time, even in a month the client does not use. Unused hours expire.
- A fee for hours bought in advance. The client pays for a number of hours. Unused hours may roll over or be refunded.
If it is not written down, clients tend to understand the second and providers the first. Write down the following.
- Each month's scope. The work included, and work outside the package that is charged extra.
- Hours or requests not fully used. Do they expire at month end, roll over up to a stated amount, or get refunded and in which cases.
- Use beyond the package. At what hourly rate, and whether prior approval is needed.
- Minimum term and renewal. How many months of commitment, whether it renews automatically, and how to give advance notice of termination.
- Price adjustment. When the provider may adjust the price and how far in advance it must give notice.
Detail on monthly service contracts, service levels and limits of liability is in MSA and SLA for monthly service contracts. For subscription models for software, see SaaS pricing models and subscription contracts.
5. Changes and additional work (change request)
Every pricing model needs the same procedure: when the client asks for something new, use a short document that answers four questions.
- What is being added or changed?
- How does it affect the delivery date?
- What is the additional fee? (Write the actual amount in that document.)
- Who approves on the client's side, and through what channel?
You must fix who has authority to approve on the client's behalf. If the client is a company, the person who gives instructions over LINE may not be someone with authority to pay. Have a person with authority approve or confirm at the level agreed. See who can bind your Thai company for when an agreement arises with a junior employee.
6. Deposits and instalments (sections 377 and 378)
A service job should collect money in instalments as it progresses, rather than waiting until completion, so the provider does not carry the cost of the whole project. For the cash flow idea, see profitable but short of cash.
Money received in advance has two different legal meanings.
- Deposit. Under section 377 it is given on entering into the contract, as evidence that the contract has been made and as security for performance. Section 378 sets the principle, where nothing else is agreed, that it is returned or applied as part payment when the obligation is performed, forfeited when the party who gave it fails to perform or the contract is terminated through its own fault, and returned when the party who received it fails to perform.
- Advance instalment. A payment of part of the service fee at an agreed time. It does not by itself act as security for performance.
So state in the contract and the receipt whether the first payment is a "deposit" or "instalment 1 of the service fee", with the effect when the client cancels midway and when the provider is the party at fault. The statutory text is a general rule where nothing has been agreed, so setting it in the contract matters. If a forfeiture term is unreasonably high, the court may exercise its power under the principles on penalty clauses, so do not set it above the damage you can realistically expect.
7. VAT and withholding tax (no rates given in this guide)
Points to write down and to check with your accountant
- Price including or excluding VAT. If the provider is VAT-registered, say so clearly in the quotation and contract so the provider does not have to bear the tax later.
- Timing of the tax invoice for services. The point at which VAT liability arises on services is generally tied to receipt of payment. Check the Revenue Code and Revenue Department practice with your accountant, and issue the tax invoice in the right period.
- Withholding tax. Where the client is a juristic person with a duty to withhold, the provider receives less than the invoice amount. State clearly in the contract that the client must deliver the withholding tax certificate within a set time, so the provider can use it as a tax credit.
- Overseas clients. A different VAT treatment may apply if the conditions are met. See serving overseas clients: zero-rated VAT.
The rates and conditions refer to the Revenue Code and the latest Revenue Department notifications, which can change, so check with your accountant before use.
8. Cancellation midway, late payment and use beyond scope
Three matters every pricing model should cover in the contract
- Cancellation midway. How the client must pay for work done, proportionately or by progress, whether the provider must hand over interim work, and how the deposit is dealt with.
- Late payment. The due date, the effect of delay, and the right to suspend service for non-payment. If the client does not pay, see unpaid invoices from business customers.
- Use beyond scope. For work delivered but not yet paid for, state clearly that copyright or the right to use stays with the provider until payment is complete.
9. A hypothetical example for choosing a pricing model
Suppose a web design agency receives work from 3 clients. The first wants one website with a clear design. The second wants an existing system improved and does not yet know the scope. The third wants the website looked after every month.
- The first uses a fixed price, stating the pages, the number of revision rounds and the payment instalments.
- The second starts with an hourly assessment within an agreed budget frame, then changes to a fixed price once the scope is clear.
- The third uses a monthly price, setting the regular work included, the channel for reporting problems, and extra hours charged separately.
This example is hypothetical, to show that each pricing model calls for different contract terms. It is not advice for any particular case.
10. Checklist before sending the quotation
- Choose the pricing model that matches how clear the scope is
- Write the deliverables, the completion criteria and what the price excludes
- Set the number of revision rounds included and a written procedure for further changes
- Hourly: state how time is recorded, reporting and the budget frame
- Monthly: state whether it is a fee for availability or for hours bought in advance, and what happens to unused hours
- Make clear whether the first payment is a deposit or an instalment, with the effect of cancellation
- Name the client's person with authority to approve
- State whether the price includes or excludes VAT, and the terms for the withholding tax certificate
- Set the effect of late payment and the right to suspend service
- For delivered work, provide that rights pass to the client once payment is complete
Further reading
- MSA and SLA for monthly service contracts for the framework contract and service levels
- From one-off projects to monthly revenue when moving the revenue model
- More work, less profit to choose worthwhile jobs
- SaaS pricing models and subscription contracts when the service is software
- Unpaid invoices from business customers when the client does not pay
- Serving overseas clients: zero-rated VAT for clients outside the country
Service pricing is safe when the scope, change requests, deposits and tax are written into the contract before work starts, not just the price figure.
We draft and review service contracts, quotations and change request documents for service businesses, so that scope and payment terms match the pricing model you choose. For an initial consultation, call +66 92 254 2045 or send us the details. See also contracts and documents and tax and accounting.
This guide is published by Suwanvara Law Firm — a Khon Kaen law firm established in 1986. General information only, not legal advice on a specific matter.
