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Interim Value Proposition

The myth: Interims cost pro-rata what permanents cost.  
 
Compiled by IIM Director, Ad van der Rest      
Reproduced by kind permission http://www.iim.org.uk
For more Information click on Interim Value Proposition
 
When businesses look for an Interim resource, they sometimes calculate the ‘Interim day-rate’ based on the pro-rata cost of an equivalent permanent hire. That calculation may go along the following lines:
 
        Senior Employee at £80,000 Divided by 260 days = £308
 
This calculation fails to describe the daily cost to a business of such an employee. Why is that? On top of the £80,000 base salary, add the benefits costs and variable costs of employment:
 
Company National Insurance £ 9,500
Car Allowance £ 7,000
Medical/Life Insurance and other benefits £ 3,500
Employers’ Pension Contributions £ 4,000
Bonus and Incentives £16.000           Total: £40,000
 
Permanent hires require lengthy inductions and training to get them ‘up to speed’. They also consume significant costs at the end of their employment, whether that is in notice periods, or other payments such as redundancy, compromises, and ‘easing off’ of effort. There are also costs relating to unforeseen events ranging from Maternity, Paternity, long-term ill health, employment disputes and tribunals, or plain old poor performance or capability problems to carry across the employee population. An additional 25% base salary pays for all these actual and potential costs.
 
This resulting £140,000 cost is not spread over 260 paid working days, because employees take:
  • Holidays 
  • Bank Holidays 
  • Jury Service 
  • Sick Days 
  • Training days 
  • Compassionate leave (which you pay for) 
Calculating 25 days holiday, 8 Paid Bank Holidays, 13 typical sick days, and a further 14 days in a variety of compassionate leave, burst boilers, jury service, training days and others.
 
A salaried ‘permanent’ employee actually only works 200 days per year. £140,000 divided by 200.
 
Your actual cost of employing an £80,000 permanent employee = £700 per day
 
Not only do Interim Managers factor–in all these costs you normally have to pay, into their Interim daily rates, their Interim Value Proposition means they bring that unique ‘Interim’ approach:
 
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

So for actual added value, they are well worth that ‘bigger-looking’ number and a bit more...
 
Also:  http://en.wikipedia.org/wiki/Interim_management