Money Talk

What a year it’s been. This month, as the salary season begins, we are again reminded of the testing economic trial that has been taking place in the design and marketing arena over the past 18 months or more. How long it will continue to dent the futures of the professionals in the sector is anybody’s guess.

October has now informally become a key time for the publishing of statistics and data. Not only is there Design Week’s annual design consultancy staff salary survey, but design-friendly accountant Willott Kingston Smith published its own study on the financial fortunes of design consultancies and their employees this month too (DW 17 October).

So what did the Design Week survey reveal? Well, the overall results of our annual trawl through consultancy salaries are probably as you might expect for a year in which ‘redundancy’ and ‘insolvency’ went on the rampage. There aren’t any real surprises in the data, which is compiled this year just from submissions from specialist recruitment agencies (though we did a separate survey of design consultancies). And yet despite the lack of any great action from the figures, which only show what has been and gone, there have been some very revealing projections from recruitment agencies and consultancies about the future.

On the whole, salaries were rather flat for the surveyed sample over the 12 months to September. By and large, where salaries did increase it was by the rate of inflation only – by a couple of per cent.

Although year-on-year comparisons can be tricky when samples vary, there is even statistical and anecdotal evidence to support the fact that some design consultancies have even cut salaries (particularly in the case of directors and chief executives of the biggest groups, where remuneration is most linked to group performance). This is symbolic of the financial pressures still faced by design groups of any discipline right now.

There is some contradictory evidence to the main trend, however, among the top 20 or 30 players and in consultancies outside of London, which have all seen some exceptional growth in pay rewards this year.

Creatives’ salaries

To give you some examples, according to the recruitment agencies surveyed, junior designers in London averaged a salary increase of 4 per cent this year, when outside of London, the average raise was 8 per cent. The same regional ratio holds true for all the other strata of creative positions: middleweight and senior designers outside of London outstripped their London peers by the same amount (4 per cent); middleweights outside of London averaged an annual increase of 5 per cent compared to an increase of just 1 per cent inside the capital; and seniors outside London averaged 7 per cent more than last year, compared to 3 per cent inside London.

It was non-London (including Scotland) creative directors who managed the most accomplished pay rises this year, not only averaging pay increases of 11 per cent year-on-year, but outstripping their London counterparts by 10 per cent. Clearly, wage growth for creative roles in London has been very hard hit by the slump in demand for design consultancy services across the board. But this doesn’t seem to have been the case outside the capital.

What does this mean for the territories beyond London? The capital has by tradition always commanded higher salaries than the rest of the country, and in so doing has led the way in terms of setting new pay packet peaks for creatives to aspire to. Some of this ground has certainly been recouped by non-London creative posts now, which is no bad thing. This trend also suggests that the value of the senior creative role is as well-prized as it ought to be. After all, finding quality senior creatives has long been the single toughest challenge facing recruitment agencies and consultancies.

So what about London? If London does set the pace for the rest of the country, the question is whether it is a matter of time before the slowdown in creatives’ salaries witnessed there reaches the rest of the country. And if not, have these pay rises been justified?

There has long been great concern that our pay rises are too high. Design consultancy fee-income has been rising way behind the increase in staff costs. Because staff wages make up the biggest single part of consultancy overheads, if your wage bill is going through the roof while your revenue is not moving, you’ve got a problem in the making. Even though consultancies are repeatedly shown this evidence, it seems to be ignored. Perhaps employees have more influence than they realise if they are getting rises anyway.

Now, while this survey is not designed to study fee-income, the results of Design Week’s Top 100 survey, published in June, confirm an obvious fact, that average revenue is down on last year. This confirms the fear that pay rises occur in spite of falling revenues. In the light of this, there is a second reading to the regional disparity shown in the data, which is that while London consultancies have responded to the threat of slowing fee-income, those outside of the capital have not been quite so sage.

Management salaries

Of all the non-creative roles, project managers and account executives seem to have come off best over the past 12 months. In the London catchment area, account executives managed to negotiate an extra 12 per cent for themselves on last year, according to our recruitment agency sample. Outside of London, and in keeping with the two-speed salaries of creatives outlined above, account executives salary increased by a whopping 22 per cent. Project managers also did well for themselves, with average salaries up 9 per cent on last year both in and outside of the capital.

People in other functions were not quite this lucky though. New business directors’ pay fell 5 per cent across the country, which is e e perhaps curious given the shortage reported by many recruitment agencies, unless they have benefited from more advantageous incentive-based packages that have cut basic pay levels. Managing directors have felt the pinch too. In our sample, managing directors’ salaries fell 17 per cent beyond London.

While our data gave London managing directors an average rise of just 4 per cent, just over inflation, other data – particularly that from the big marketing services networks – points to substantial reductions in managing directors’ salaries, which are most closely linked to group performance anyway.

Comparisons between agencies and consultancies and across design disciplines

Though we are not publishing the average figures submitted by the consultancies this time, there are some discrepancies with the information provided by the agencies that is worthy of note.

Consultancy data is invariably higher than agency figures, a fact borne out by the average salary levels of creative directors in London. While agencies average creative director salaries at £52 864, the consultancies say it is more like £59 212. Also managing directors in London average £84 471, say the consultancies, while the agencies put the figure at £68 500 – this is borne out by consultancy data putting managing directors of interiors and architectural groups on a much higher salary than the agencies do. Similarly, outside of London, managing directors of interiors and architectural practices average a salary of £61 667 compared to £41 250 as averaged by the agencies. This puts the average managing director’s salary outside of London at £66 286, a lot higher than the £58 438 printed in these tables.

Other Indicators

Willott Kingston Smith’s full financial report on its 30 leading design and branding consultancies has also just been published (Design Business, DW 17 October). This independent survey seems to suggest that the level of salary rises among the UK’s biggest players is still far higher than it should be, given the stagnant nature of the market over the past 12 months (though some groups appear not to have filed very recent information at Companies House).

Willott Kingston Smith partner Amanda Merron has been troubled by the rate of salary increase in the design industry for years. ‘Once again salaries went up well in advance of revenue,’ she says. ‘Average employment costs per employee increased by 14.8 per cent, according to our figures.’ This is despite the restraining effect on such ‘per employee’ figures that redundancies will have had.

‘But given that the sector is flat in terms of growth, this is still worrying,’ she says, though she is happy that the increases aren’t as dramatic as in previous years.

The Outlook

Attitudes to the future tend to be optimistic in design. It’s that sort of industry. Nevertheless, there is a definite undercurrent of real optimism running through the respondent questionnaires in this year’s salary survey.

Nowhere is this highlighted more than in the expectations for next year’s pay as noted by the consultancies themselves. The average minimum anticipated increase across the board for the next 12 months is 4.2 per cent. This takes into account the lowest estimate where a range was given, as well as the 15 per cent of consultancies that said they would not be increasing wages next year.

Let’s just hope they see the growth in revenues that warrants such pay rises.

‘Although the market has been fairly static, and, on the whole, there are far more candidates than positions, market conditions seem to be improving and we would expect this to continue with fairly steady growth towards the end of this year and into next year.’

Bernadette Sturley

Managing director, Creative People

‘[One] positive effect is that many senior designers who have found it difficult to find a challenging position have started fresh, independent consultancies, which can only add value to the industry.’

Steve Crompton

Managing director, Cream Creative Resources Management

‘While it has been a quiet year for graphic design recruitment, there has been a slow, but steady increase in the number of companies looking for new staff. Although many design consultancies are currently happy to meet talented new designers, most are doing so cautiously.’

JoHn Bray

Graphic design consultant, Faststream Recruitment

‘It’s currently a buyers’ market. But it would be more rewarding if clients would give us feedback directly following interviews.’

ANONYMOUS RECRUITMENT

CONSULTANT

‘There has been almost no increase in employees’ salaries over the past year, with the majority of bonuses not being paid out.’

Jaqueline Rose

Design division, Major Players

‘Many candidates are freelancing while looking for permanent jobs and many people who have jobs are staying put as there are few opportunities.’

Jo Peters

Founder, Jo Peters & Associates

‘Consultancies need to invest more in training and personnel. The UK industry overall is quite archaic in its recruitment and personnel welfare.’

Hilary Canto

Director, The Canto Consultancy

‘Staff retention is critical to the stability of a design group. Keeping your staff happy and motivated will ensure productivity levels remain high and consistent. I have been advising my clients to keep an open line of dialogue going, from the management down to the junior designer. Not doing so ultimately leads to idle gossip and discontentment in the workplace.’

Peter Cook

Recruitment consultant, Mac Recruitment

While rates vary tremendously between job functions, here we have attempted to gauge average hourly and day rates for designers across the country. It should be remembered though that it is not uncommon for experienced consultants to charge themselves out at £1000 a day. The data has been supplied from two sources again, from design consultancies themselves and from specialist recruitment agencies.

Hourly rate

Average: £23.50

Lowest: £15.00

Highest: £36.75

Day rate

Average: £190

Lowest: £95

Highest: £550+

IR35

Freelance staff should be concerned about new National Insurance legislation introduced in the 1999 Budget news release – IR35. This hotly debated ‘tax’, seemingly designed more to hit IT consultants and engineers, effectively means you could be treated as an employee of any long-term client for tax purposes, despite any arrangements you already have to pay National Insurance. IR35 should only affect you if you are on longer term contracts and are seen to operate as a ‘personal services company’. But it is applied on an individual basis and depends on whether you are deemed to be ’employed’ or ‘self-employed’.

The Inland Revenue says the purpose of the new rules is to remove opportunities for the avoidance of tax and Class 1 National Insurance Contributions by the use of intermediary companies in circumstances where an individual worker would otherwise be an employee of the client.

For more information see www.inlandrevenue.gov.uk or ask a tax office for leaflet IR56. Alternatively you can call the IR35 helpline on 0845 303 3535. Also see DW feature on IR35 (DW 7 February)

What we did

In a bid to create the roundest picture possible of the state of salaries in the industry, we sent a questionnaire to recruitment agencies and a similar one to our Top 100 database of design consultancies across all design disciplines. Both groups of respondents were also reminded to respond through the news pages of the magazine.

London – Designers

London Designers

London – Management

London – Management

Outside London (including Scotland) – Designers

Outside London (including scotland) – Designers

* not enough responses to gain an accurate figure

Outside London (including Scotland) – Management

Outside London (including Scotland) – Management

* not enough responses to gain an accurate figure

PER CENT DIFFERENCE IN AVERAGE SALARIES FROM 2001-2002

(based on recruitment agencies data)

London

Junior designer +4

Middleweight designer +1

Senior designer +3

Creative director +1

Artworker -1

Managing director +4

New business director -5

Project manager +9

Account executive +12

Account handler -13

Production manager +1

Studio manager insignificant increase

Outside London

(including Scotland)

Junior designer +8

Middleweight designer +5

Senior designer +7

Creative director +11

Artworker -2

Managing director -17

New business director -5

Project manager +9

Account executive +22

Account handler +6

Production manager -2

Studio manager +8