How to calculate an Interim Managers day rate?
There have been many debates over the years about how to work out an Interim Managers day rate. The truth of the matter is that there is no fixed formula to determine how much you should charge for an assignment as it depends on many factors, some of which are outside of the interim managers’ control.
For instance, a common rule of thumb has been that an Interim Managers day rate can be approximated to 1% of a total annual income of the permanent person carrying out the same task (this includes adding a monetary value for the benefits in kind the permanent person would enjoy in the role such as company car etc).
Therefore using this methodology if the person carrying out the permanent role commanded a salary of £50,000 plus Car (valued at £5,000) then the interim day rate would be £55,000 x 1% = £550 plus Vat.
However, this is perhaps an over simplification and does not take into consideration many other factors such as :-
- The reason the role is available in the first place – i.e. will the interim be required to tidy up the chaos left behind by their predecessor. In this case you may be justified in requesting a higher day rate.
- Does the assignment not have an equivalent permanent role to compare it with or is it a project?
- Is the company in distress, is there a risk you may not get paid?
- Does the client already have an expectation to pay on a pro–rata basis? If so, it may be difficult to achieve the day rate you are looking for.
- How willing and able are you the interim to hold out until an assignment comes along where the client is willing to meets your day rate expectations?
- How well does your ISP know you? Will they fight your corner and sell your skill set to the client in order to maximise the day rate?
- Internal Politics – sometimes those people signing off on assignment rates simply can’t get their head around the fact that the interim may be earning more than themselves on a pro-rata basis.
- Assignment complexity – What are you being asked to do, it is complex or straight forward?
- Geography – Is lots of travel involved?, are you going to be away from your family?
- Competition – Is there likely to be lots of Interim Managers able to fulfil the brief?
In summary, you can use a rule of thumb calculation but then you will nearly always need to make an additional judgement based on the above and other factors to set your required rate – after all only you the Interim Manager really knows how important securing the assignment is to you.