Interim management day rates April 2014

 

© Institute of Interim Management (IIM) April 2011 and April 2014) version 2.1 2

Understanding interim management day rates Professional interim managers and executives charge a day-rate based on their track record, seniority and the value that the client business will receives from their interim management solution. The work is then invoiced, either directly or via an interim service provider (agency). Interim day rates are not calculated pro-rata to an employee salary divided by the working days in the year. That is because interim managers are businesses in their own right that offer a service that is immediately available and only charged for the days the interim manager actually works. Interim managers also factor into their all-inclusive daily price all the costs that employers pay on top of base salary when they pay their own employees. If a client business does price an interim day rate by dividing an equivalent annual salary by 260, the typical method one might use when pricing a Fixed-Term Contractor, then that business is more likely to attract people who are recently redundant or between permanent jobs than a genuine professional interim manager or executive who has a track record of completing effective interim assignments. It is also possible that money saved on the rate by engaging a cheaper solution may be swallowed up in time delays and recovery costs if the assignment is not implemented properly or if the person leaves the company in the lurch during the assignment because they have landed a permanent job. Calculating daily costs The following worked example shows why an interim day rate is not simply annual salary divided up. On top of (for example) a £100,000 executive salary, employers pay company NI, employee benefits, pension, bonus costs, holidays, bank holidays, sick days, jury service, training days, ‘burst boilers’ and compassionate leave days. Employment actually costs a company around 2/3rds on top of base pay. Employee base pay (example) £ 100,000 100% Company national insurance (limits apply; rounded) £ 12,000 12% Car allowance £ 8,000 8% Medical, life insurance and other benefits £ 4,000 4% Employers’ pension contributions (often higher or ‘final salary’) £ 8,000 8% Bonus and other incentives (often much higher) £ 20,000 20% Employee absence (40 days not worked, but paid for) £ 15,000 15% Total costs to the business for 220 days worked: £ 167,000 167% Total cost to the business for each employee working day: £ 760 0.76% A professional interim manager or executive will seek a day rate higher than a simple pro-rata or annual base pay to cover their business costs and to reflect their expertise and value. In practice, an interim manager working much below 0.8% of the ‘equivalent’ salary of an expert manager or executive is working below ‘cost price’. A good starting point for clients when pricing an interim manager is to allow 1% of an equivalent annual salary, per day, though of course this can vary somewhat depending on the circumstances and the value that the interim manager will add or save.