How interim managers are paid

Interim managers typically charge by a ‘day-rate’ based on their track record, function and seniority. Depending on how sourced, clients are invoiced by the interim manager or the service provider.

If you are buying direct, the interim manager will negotiate a day-rate directly with you. Sometimes they may consider a fixed fee, part-payment by results or other arrangement, depending on the work. If the interim manager comes to you via a service provider, then the provider will take a fee (margin).

An interim manager is an independent professional who charges on the basis of their added value to the business. That value might be judged by extensive cost-savings, revenue and/or profit growth, significant risck mitigation, or the provision of key services that may not be able to be done within your organisation currently. Interim managers both advise and implement, often in challenging conditions. They expect to be rewarded for making a big difference, not simply for ‘turning up.

The yardstick for pricing an interim manager is their ‘value’, not a supposed ‘equivalent’ salary of a permanent employee.

Agree a rate that reflects the value you receive from the interim management solution offered. Don’t mistakenly value the ‘interim day-rate’ based on the pro-rata cost of an ‘equivalent’ permanent. If this trap is fallen into, you may significantly reduce the likelihood that a genuine professional interim manager or executive will express interest in your assignment and be more likely to attract applicants who are marking time between permanent jobs. Once such an applicant spots a permanent job they may be off. Also, money saved on the rate may be swallowed up in time delays and recovery costs if the assignment is not implemented properly or if the person leaves you in the lurch.

Interim managers are neither employees nor agency temps, both of which carry hidden costs, including company NI, benefits costs and variable employment costs. You should, factor in holidays, bank holidays, sick days, jury service, training days, burst boilers and compassionate leave days that you pay for. The following approximate figures give a sense of what your employees actually cost:

Employee base pay: 100%

Company National Insurance 12% * rounded: variable due to limits and caps.
Car allowance, medical benefits, pension 8%
Medical, life insurance and other benefits 4%
Pension 8%
Senior employee bonus 15%
Holidays, sickness, training 20% * employee is not working but you still pay

Fully loaded employee cost: 167%

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. When setting your rate, do you want your assignment to attract a professional interim manager or will any ‘temp’ or available person do?

For real added value, don’t use an ‘agency temp’ or ‘perm equivalent’ pay calculation to attract a professional interim manager.

You are paying for seasoned ‘expertise as a service’ just when you need it.

Download: How Interim Managers Are Paid