Are the pre-covid day rates still justified in Switzerland?
Demand determines supply so it is not surprising that certain Interim Managers are currently offering their services at much lower rates than before the crisis. But does price dumping make sense and above all is it sustainable?
In Switzerland, a rule of thumb is that the day rate is around 1/100 of the annual wage, for example, a COO gap assignment with an annual gross salary of CHF 250,000 generates a day rate of CHF 2.500.
However, the annual salary of CHF 250,000. divided by 220 working days shows a day rate of CHF 1,136.
Comparing the two-day rates shows an additional cost of CHF 1,364 / day (+ 120%), how can this be justified?
The day rate of the Interim Manager includes acquisition costs and the Interim Manager Providers charge up to 30% of the day rate. For a permanent position, the headhunter charges a similar commission.
The permanent position also has social security costs and in many cases, there may be additional “high cost” benefits.
The Interim Manager is available immediately and business continuity can be guaranteed. However, the Immediate availability of the Interim Manager has its’ cost because the unpaid period between mandates is financed by the interim manager.
Due to the uncomplicated hiring and leaving regulations, there are no additional costs at the end of the mandate.
Interim Managers are used to delivering added value from day one, no extensive training period is needed. In contrast, there is a formal training period for a new, permanent employee. To ensure this quick start, interim managers usually bring more skills with them than required by the position.
Fact: the difference between the internal day rate and the day rate of an interim manager is in most cases entirely justified.
If an Interim Manager sells his performance below his value, this obviously cannot be sustainable, and it damages the market rate of the majority of Interim Managers.
As a company would not try to hire the COO (in the example above) at a massively reduced annual salary of CHF 125,000, an interim manager should not accept such a mandate at a massively reduced day rate of CHF 1,250.
When filling strategic interim positions the company must focus on performance and not on price, also because the professional Interim Manager will ensure that a high level of service is maintained.
A slight price adjustment is justified but a mandate should still be awarded on the professionality of an Interim Manager and not on an opportunistic “cheaper” day rate.