Daylight Robbery?

So you think you will benefit from bringing an interim consultant / project manager in to the business to help out with an impending project or to help improve a service issue and you are quoted £500 PER DAY!

EXTORTIONATE! You instinctively do your calculations and determine that the equivalent of a ludicrous £130K PER YEAR!

Be Cautious in Comparing Pay

If you are a PAYE employee it’s easy to get confused about interim consultant rates. The thing to remember is that interim consultants can only charge for the time they are actively working for a client. However, they are not necessarily active for a client for 40 hours a week, 52 weeks of the year. Therefore their rates have to take into account all the time they are not billing a client as well as their overheads. Let’s take a look at the details.

Why Have Interim Consultants?

Interim consultants play a vital role in the economy. Without interim project managers and consultants business would have to find ways of training and up-skilling their own staff. Can you imagine hiring a procurement or supply chain consultant to carry out a specific review that only needs doing once a year?

Analysing a Day Rate

Consultants providing services in many industries such as Procurement, Buying, Supply Chain & Logistics generally base their charges on day rates. These can be the source of confusion or contention for the companies who need to hire firms using day rates as the headline rate can seem high.

Often, when evaluating rates, people will take the headline day rate, multiply it by 261 (the number of weekdays in a year) and assume they are being ripped off. For example, a day rate of £500 is made to look like a salary of – 261 (52 weeks) x £500 = £130k! Nice money if you can get it.

In fact this is far from the truth. In simple terms day rates are calculated in 3 steps.

1. Billable Days

Number of weekdays in a year = 261

Less – 25 Holidays
Less – 8  Bank Holidays
Less – 5 days allowance for being ill
Less – 24 days of non-billable time between projects
Less – 10 days for marketing and business development

Total – 72 days

Total billable working days in a year = 261 – 72 = 189 Days

2. Overheads

£500 – advertising
£500 – Hardware and Software
£1000 – Servers etc
£100 – Affiliation costs (professional bodies such as CIPS, CILT, MoID’s )
£2000 – Interviews and visits to client sites etc
£150 – Insurances such as indemnity etc
£500 – Accountancy fees etc
£2000 – Phone/Office etc

Total = £6,750.00

This equates to a daily overhead of £35.71 (overhead divided by billable days)

Now the required salary including Employers National Insurance Contribution etc

3. Summing it up

A well-qualified and experienced consultant salary = £65k

This gives a day rate of £384 (salary + EE NI divided by billable days)

Next comes profit and 20% is an accepted level of profit = £76.8

Now add it all up – £35.71 + £384 + £76.8 = £496.51

So the day rate of £500 gives the consultant a salary of £65k and the company a profit of £15k.

I am sure you will agree that this is by no means the colossal amount that you might have initially thought it was, for someone who has Experience, Availability, Objectivity and a track record of delivering results?