Delivering Interim Services

June 24, 2011

It is flawed logic to set an interim manager’s fee based on the pro-rata of a permanent employee’s base salary

Compiled by the Institute of Interim Management

When businesses look for an interim manager, they sometimes mistakenly value the ‘interim day-rate’ based on the pro-rata cost of an ‘equivalent’ permanent. An interim manager is not an ‘agency temp’.

This worked example shows why:

On top of an (example) £80,000 base salary, add company NI, benefits costs and variable employment costs. Then, factor in all the holidays, bank holidays, sick days, jury service, training days, burst boilers and compassionate leave days that you pay for. The following figures are approximate, but give a good sense of what your employees actually cost you:

Employee base pay (example) £ 80,000 100%

Company national insurance (limits apply. Rounded) £ 8,000 10%
Car allowance £ 6,600 8%
Medical, life insurance and other benefits £ 3,300 4%
Employers’ pension contributions (often higher or ‘final salary’) £ 6,600 8%
Bonus and other incentives (can be much higher) £ 12,000 15%
Employee holidays & absences (52 days not worked, but paid for) £ 16,000 20%

Total costs to the business for 208 days worked: £ 132,000 165%
Total cost to the business for each employee working day: £ 640 0.79%

Employers offering ‘pro-rata’ employee base-pay rate to an interim manager are offering a rate of only c.60% of the ‘equivalent’ employee’s package. That strategy significantly reduces the likelihood that a genuine professional interim manager or executive will express interest in your assignment. Once below a ‘daily-rate’ of 0.8% of ‘equivalent’ employee annual base pay, an interim manager would actually be providing services to you below ‘cost-price’, as they cover their own business costs.

Any ‘savings’ on engaging a ‘cheap interim’ may be swallowed up in time delays and recovery costs if the assignment is not implemented properly or if the ‘cheap interim’ leaves you in the lurch.

The actual value of professional interim managers and executives:

Engage in a fee discussion on the basis of the added value that interim managers offer through:

• Return On Investment – delivery of a solution that gives real benefit to the client
• Speed – being quickly available and able to make an impact quickly
• Expertise – being sensibly over-qualified with a wealth of skills and knowledge
• Objectivity – outside of company politics with a business focused perspective
• Accountability – being instrumental in an assignment’s successful delivery
• Effectiveness – with the authority and credibility to effect significant change or add value
• Commitment – a professional interim approach to deliver then exit in a good way

For real added value, don’t use an ‘agency temp’ pay calculation to attract a professional interim manager. They offer ‘Expertise as a Service’ and handle ‘Business as Unusual.’

[This common sense explanation © Institute of Interim Management (IIM) may be freely reproduced and used, with due credit, to explain interim management (03/ 2011) ]

To the IIM’s model, the DeliveryDemon suggests adding the following factors:

  • Recruitment of a permanent employee may have associated search costs
  • When the services of a permanent employee are no longer required, there are costs associated with redundancy
  • An interim takes responsibility for their own professional development whereas with an employee there are costs for training and time away to train