Charge-out rates and benefits have fallen, new research shows

Charge-out rates have dropped among senior design staff, benefits have been cut and pay increases limited, according to a new report released by the Design Business Association.

The 2009 DBA Charge Out Rates and Salary Levels survey shows last year’s results to be something of an anomaly. That report found that charge-out rates were increasing for the first time in more than five years (DW 7 January).

Despite this year’s drop in charge-out rates among senior staff, the average rate at which staff are charged to clients is still increasing – now by 4 per cent to £104 an hour, indicating that senior staff have been worst hit.

DBA development director Adam Fennelow reasons that the pattern for this year’s charge-out rates is ‘consultancies reducing costs at the upper end to win the business – rather than clawing money back by getting junior staff to put the hours in, which we don’t advise’.

Utilisation rate – percentage of time invested by staff billed to clients – stands at 71 per cent, up 8 per cent on last year. Fennelow says, ‘Historically, we have found design groups are a bit slack in keeping an eye on this,’ adding, ‘Creatives feel they need to give their best and always put in that little bit extra, but if you’re not making any money, there’s no point.’ Recession is enhancing the importance of this, he says.

The packaging sector is shown to command the highest rates and salaries, while point-of-sale and exhibition designers are paid the lowest and charge the lowest rates.

Elmwood, which won five DBA Design Effectiveness Awards this year, works in a number of sectors, including packaging. The consultancy’s London managing director, Nicolas Mamier, says, ‘For many clients, to invest in packaging design is the biggest thing they can do to gain market share, and I suspect it’s easier for consultancies to prove they can make a difference in packaging.’

Mamier adds that Elmwood’s fees have been under pressure, but it has been able to maintain prices by providing return on investment. Working abroad, he adds, is ensuring fees can be maintained, as the pound has dropped against the euro.

In March, Design Week’s own salary survey found that attitudes to salaries have changed and salary levels have dropped (DW 19 March). It also recognised the impact of entrepreneurship and the growth of the digital sector.

Navyblue has cut salaries recently and will look to ‘hang on to as many staff as possible’ in coming months, according to director Ron Cregan, who adds that despite the salary cuts, its charge-out fees remain the same. He says, ‘Reducing prices devalues the business. Our business model remains the same. We’ll need to run a lean business.’

Expected trends in staff and fee levels

  • 46% of those surveyed expect fees to increase in 2009/10
  • 11% of businesses expect to reduce headcount in 2009/10
  • 13% of businesses expect to increase their headcount by more than 10% in 2009/10

Source/ DBA

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  • simon wright November 30, -0001 at 12:00 am

    Undoubtedly times a tough at the moment. Unlike the last major downturn, this one has a much more global impact in as much as the competition is in centres that weren’t even on the radar last time. This in itself puts pressure on fees and therefore salaries. Whilst our intent is to maintain the staff if we possibly can, it might be that the figures simply don’t allow us to do that for too long. It is most frustrating that we find ourselves aiming to maintain staff levels as our primary goal and profits as secondary to that, whilst many of our clients seem to maintain the view that shareholder profit is the holy grail and anything that might reduce that from last years figures should be strenuously avoided.

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