01 Apr It’s All About Fees

This year’s Fees & Salary Survey published by the Design Institute of Australia has a great deal to interest design practitioners and design industry watchers alike. Based on a much larger pool of data than in previous years it covers more design disciplines in greater depth than ever before.

Fees are a subject that designers never tire of. In the parallel survey the DIA did of design industry concerns it ranked equal sixth with education as an issue for designers. Some expressions of this concern regard agreement on fees and professionalism in charge-out rates:

Stop competing against each other. This process leads to low fees and sub standard design including poor delivery – Interior Designer, VIC.
Consistent offer from our profession on fees without the current 50% variation from one office to another – Interior Designer, WA.
Professionalism in charge out rates, setting of standards so design isn’t undersold – Industrial Designer, QLD.

The survey went to most design businesses in Australia that are primarily involved in the design areas of interior, industrial and graphic design. So it’s a representative snap shot of the size of the consulting industry in Australia and the relative size of these three major design areas. There were around 1800 interior design businesses, 4500 graphic design and 350 industrial design businesses. It should be noted that this count of interior businesses includes only some of the 4700 architectural practices that may also be involved in interior design projects. The survey indicated that there is an average of 3.1 designers in each business clearly flagging the weighting of the design industry toward micro businesses. 68.2% of design businesses are three people or less with less than 7% exceeding 10 people. Small business pressures dominate the industry and the high levels of competition make it difficult to grow larger business structures.

Fees are a troubling area of design practice. The survey certainly indicates the broad range of fees being charged at all experience levels with the ‘Designer’ range showing a lowest figure of $20 per hour and a highest of $240. However looking at this year’s median figure for a Designer of $90 per hour we see a growth of 5.8% on the previous year. Similarly for a Senior Designer there is a growth in the median figure from $100 to $110. At the upper levels of Director and Associate the median value has remained flat over the last three years at $120 per hour. So the fees most commonly charged, those of the working designers in businesses, are growing steadily in line with inflation, but there is a hesitancy to increase fees for the principals of design businesses.

Designers are asking the DIA to set fee rates in the design industry. Calls are for:

Standard recommended fee rates – Industrial Designer, VIC.
DIA to set a standard for fees so that undercutting is not a common occurrence – Interior Designer, NSW.
Unity in fee structures nationally – Interior Designer, QLD.

While this has obvious problems in terms of trade practices, economic history demonstrates that it is also not likely to be good for the industry in the long term. Following its experience of publishing recommended salary levels for designers in the 1970s and 1980s where the recommendations were often at odds with the market the DIA has moved to adopt a method of providing an accurate snapshot of what’s actually happening. This provides designers with the information to position their business in relation to their experience, level of service, location, client base and business size.

The provision of clear information on the range of fees in the market provides the upward pressure on fees that designers desire without artificially nominating recommended rates. Businesses operating below the median figure in the survey can more confidently make decisions about changing their fee structure to follow the industry. Businesses with the experience and client base to command higher fees can also assess their positioning.

Concern about fees also focuses on the difficulty of making a realistic income despite the fees been charged. Confronted with a designer asking $100 per hour many clients perceive that designers must be doing very well out of the deal. However in previous DIA surveys there is a clear indication that designers give away a significant portion of their saleable hours. This is the Achilles heal of the industry.

I only do retail design and my biggest issue is getting retailers to pay me what I’m worth.…So therefore my fees are very low, I work my butt off and that brings everyone else’s fee down too – Interior Designer NSW.

This earlier survey identified that designers are only managing to sell two thirds of their time on average. It is this area that offers the biggest gains for designers trying to get more income from their activities. If you’re already achieving the industry average or above in hourly fees then pulling ahead of the industry average of 25 chargeable hours a week and getting closer to the ideal of 32 gives immediate gains.

However this is often easier said than done. Both the work culture of the design industry and the increasing levels of competition make it a tough area to deal with.

Architectural firms buying work – Interior Designer VIC.
Firms need to stop cutting fees to buy work – it’s hard enough as it is – Interior Designer WA.

With firms in the built environment commonly using percentage fees as a charging method there is an additional area of friction. Median percentage fees have remained flat over the last three years at 10% for a $200,000 project and 7% for a $1,000,000 project. However the lowest percentages returned are around one third of these figures making incomes very slim indeed. There is undoubtedly some truth in the accusations of buying work to maintain cash flow in larger design businesses. But this is also an indicator of the struggle to sustain businesses of above average size in an exploding design sector overheated by excess community awareness and a boom in design education.

For anyone wanting more information about the survey, copies are available from the DIA national office. The information about issues and concerns in the design sector will also be published as a report that will be freely available from the DIA web site later this quarter.

Published April 2004 | Artichoke Magazine

David Robertson