MCCA Fees & Remuneration Survey 2007

MCCA Fees & Remuneration Survey 2007

MCCA Fees and Remuneration Survey 2007 • This report is strictly confidential and restricted to participating members of the Marketing Communications Consultants Association • No part of its content may be published without the prior written consent of the MCCA • Every effort has been made to ensure the accuracy of this publication, but no liability will be accepted for reliance placed upon it • The findings in this report are based on the responses from 26 agencies and the results should, therefore, be treated with caution • 18 agencies had a gross income up to £5m • 4 agencies had a gross income of £5m – £10m • 4 agencies had a gross income in excess of £10m

Management Summary

Management Summary • 18 agencies (67%) indicated that they use chargeout rates for at least part of their remuneration from clients with a multiple of total employment cost being most likely to be used to set them. • 5 agencies (25%) indicated that they use a combination of total employment costs to set charge rates, 2 (10%) a multiple of basic salary and 5 (25%) both of these. 8 (40%) used other methods • The chargeout multiples applied in respect of basic salary range from 2.57 to 3.71 whilst in respect of total employment cost they range from 2.57 to 3.57 • The level of on-cost applied to base salaries when establishing chargeout rates ranges from 17.5% to 31.25% • Typically agencies review the competitive landscape with regard to the multiples applied and review their rates with clients at least once a year • 77% of agencies reported that hourly rates have remained static over the last year whilst 11% reported a slight increase and 6% a slight decrease • 55% of agencies reported that hourly rates have increased significantly over the last 3 years whilst 39% reported that they had remained static • In the majority of cases the time to be spent on a project is defined and agreed in advance and charged on that basis with only a minority indicate that fees are calculated post project

Management Summary • 88% of agencies indicated that they received at least part of their income from project fees • 41% of agencies indicated that the proportion of income derived from project fees had stayed the same in the last 3 years, whilst 34% indicated an increase and 25% a decrease • 32% of agencies indicated that the proportion of income derived from project fees had stayed the same in the last year, whilst 23% indicated an increase and 46% a decrease • Only 6 of the agencies (23%) responding to the survey indicated that they have payment by results schemes in place while 73% did not • 4 agencies with PBR schemes (67%) have 2 scheme in place whilst the remainder have 1 only • 61% of agencies indicated that they mark-up external bought-in costs frequently while 8% do so frequently and 27% rarely

Management Summary • 42% of agencies with PBR schemes have only 1 scheme in place whilst a further 25% have 2 and 25% 3 • 4 agencies indicated that profits were put at risk by PBR schemes with an average minimum of 12% and an average maximum of 22%

Sample Structure

21 (81%) of agencies responding to the survey were based in London, whilst 5 (19%) were based out of London

19 (73%) of the agencies responding to the survey had a gross income up to £5m, whilst 3 (12%) had a gross income of between £5m and £10m and 4 (15%) over £10m

Chargeout Rates

18 of the agencies (69%) responding to the survey indicated that they use chargeout rates for at least part of their remuneration from clients

Average Minimum Chargeout RateAccount Management/Planning/General

Average Maximum Chargeout RateAccount Management/Planning/General

Average Minimum Chargeout Rate Creative/Creative Services

Average Maximum Chargeout Rate Creative/Creative Services

5 agencies (25%) indicated that they use a combination of total employment costs to set charge rates, 2 (10%) a multiple of basic salary and 5 (25%) both of these. 8 (40%) used other methods

The multiples applied in respect of basic salary range from an average of 2.71 to 3.71,whilst in respect of total employment cost they range from 2.57 to 3.57

Whilst the majority of those use chargeout rates review them annually a significant proportion do so less frequently How often do you aim to review hourly rates with clients?

11 agencies (58%) indicated that they review the competitive landscape with regard to the multiples applied at least once a year whilst 32% did so less frequently

The level of on-cost applied to base salaries when establishing chargeout rates ranges from 17.5% to 31.25%

14 agencies (77%) reported that hourly rates have remained static over the last year whilst 2 (11%) reported a slight increase and 1 (6%) a significant increase

7 agencies (39%) reported that hourly rates have remained static over the last 3 years whilst 8 (44%) reported a slight increase and 2 (11%) a significant increase

In the majority of cases the amount of time to be spent on a project is defined and agreed in advance and charged on that basis whilst in a minority it calculated post project

Types of Fee Received

23 agencies (88%) indicated that they received at least part of their income from project fees whilst 2 agencies (8%) did not

10 agencies (41%) indicated that the proportion of income derived from project fees had stayed the same in the last year, whilst 14 (34%) indicated an increase and 6 (25%) a decrease

7 agencies (32%) indicated that the proportion of income derived from project fees had stayed the same in the last 3 years, whilst 5 (23%) indicated an increase and 6 (46%) a decrease

Payment by Results

Only 6 agencies (23%) responding to the survey indicated that they have payment by results schemes in place while 73% did not

4 agencies with PBR schemes (67%) have 2 scheme in place whilst the remainder have 1 only

Mark-up of External Costs

16 agencies (61%) of agencies indicated that they mark up bought-in costs frequently whilst 2 (8%) always do so

MCCA Fees & Remuneration Survey 2007