Consultancies raise charge-out rates

Consultancies appear to be increasing the rates they charge clients for design work for the first time in over five years, according to a report by the Design Business Association.

The DBA’s Charge Out Rates and Salary Levels 2008 survey, published for the association’s members just before Christmas, has discovered that salaries and charge-out rates both increased by 5 per cent last year. This is the first time that increases in charge-out rates have matched salary-growth in at least five years.

The DBA, which conducted the survey later in the year than usual in an attempt to net business’s first reactions to the credit crunch, polled more than 100 of its members, 38 per cent of which have a turnover of more than £1m.

The drive is to increase the ratio between salary and charge-out rates, in order to increase profit margins for design groups, but design groups ‘must balance this against how well the design client sectors are performing next year’, says DBA chief executive Deborah Dawton. ‘In 2009, design groups’ ability to predict what is going to happen in their client sector is critical,’ she adds.

According to the DBA, a design business should earn about five times more from a job than it pays a middleweight or senior designer to work on it.

‘But in tough times this figure can fall to four or even three times as much – design groups need to know where they lie in relation to their competitors to help gauge what they should be charging and paying,’ says Dawton.

London-based product design consultancy Therefore’s creative director Patrick Hunt expects the group’s design fees to decrease in 2009, ‘in line with market pressures in the product sector’.

Therefore expects to make salary rises in line with inflation next year. This is considerably more than the respondents to the DBA’s survey, which plan to award average pay rises of 2 per cent to their staff in 2009.

The survey also found that design fees in the South West are rising faster than anywhere else in the UK. Last year, salaries in the region rose by 9 per cent while charge-out fees increased by 15 per cent.

Design Business Association Charge Out Rates and Salary Levels 2008 findings

• Direct salaries increased by 5% this year, as did charge-out rates

• London-based designers’ charge-out rates have not kept pace with salary increases

• As usual, however, London-based charge-out rates and salaries are the highest in the UK

• Retail, experiential and interior design businesses have the highest charge-out rates