Various organizations seek consulting advice to benefit from professional guidance and assistance to accomplish project goals, improve operations, maximize aid efficiency, and avoid or resolve certain issues. However, since every organization and project is unique in its goals and the problems for which a solution is sought by using consulting services, the cost of this advice will also be specific to each.
Pricing goods is simpler than pricing services since it is easier to track the manufacturing costs for products. When it comes to services, valuing the time, skill, and expertise that contribute to providing those services is extremely individualized. This is why various consultants ask different fees and per diems. In this article, we dive into the recommendations and experience of DevelopmentAid Recruitment Solutions which recruits consultants on a regular basis and has in-depth knowledge of fees and per diems.
What is a consulting fee?
In this article, you will find insightful analysis and helpful recommendations regarding the fees and per diems for experts working with EU-based businesses and organizations on both short and long-term projects.
Defining short-term projects vs long-term projects
A typical short-term project for EU-funded projects has a duration of less than 260 days over a two-year implementation period whereas long-term initiatives, frequently referred to as Technical Assistance projects, are more extensive and involve an all-encompassing engagement to achieve particular goals.
Long-term projects require monthly compensation whereas short-term tasks are paid on a day basis.
Compensation for short-term projects is based on a daily rate that is supplemented with a daily allowance. In contrast, consultants working on long-term projects are paid a monthly salary that may occasionally be increased by a monthly allowance.
Daily consulting fee levels
In the context of consulting for international development, a number of variables affect the calculation of a daily fee, with experience being the primary determinant. Within this sector, the experience element of consulting is further divided into three separate components: experts with a minimum of 12 years of experience fall into the first group, those with six or more years into the second group, and those with three or more years make up the third category.
Source: DevelopmentAid
However, there are additional variables that could affect the rate. According to consultants with an internationally diverse portfolio, European-based enterprises charge the least compared to those in the U.S. or Asian countries.
Consultancy fees based on location
The geographical location of a consultant plays an important role in shaping the financial arrangements of their engagement. This means that consultants residing in various regions can command different daily fees, often influenced by the disparities in the cost of living across the globe.
Experts from developed countries, where the average cost of living is higher, typically look for fees that correspond to the financial requirements of the environment they work in. This is a practical decision to maintain an appropriate standard of living, rather than simply a reflection of their own preferences. In these circumstances, the daily fees may be noticeably higher in line with the economic conditions in their region.
On the other hand, consultants from developing countries, with a cost of living that is typically lower compared to developed nations, might be more willing to accept daily fees that are relatively low. However, it should be noted that the lower fees do not imply a lower quality of expertise – it is for the most part the result of the economic conditions in the area in which they are working.
At the end of the day, the most fruitful consulting engagements are those in which the parties negotiate a mutually advantageous pay structure openly and transparently.
Consultancy fees based on sector
A consultant’s fee is also influenced by the sector in which they operate. For instance, a finance specialist is more likely to be paid more than someone working in agriculture. The importance of monetary decisions and operations demands higher fees because these could have significant financial consequences. Agriculture, in comparison, is just as important but may require distinct skill sets which may result in lower fee values.
This also holds true for consultants engaged in the banking, human rights, and legal sectors for which DevelopmentAid’s recruitment department reports that EU-based companies offer the best rates. Fees for consultants who operate in these fields tend to fall at the higher end of the scale.
There are, however, situations when additional negotiations on fees are required between an organization and a consultant, despite a consultant offering a fixed tariff, for instance, when the organization has already allocated a fixed budget to contract an expert.
For example, a consultant requested 650 Euros per working day for a previous project but during negotiations, a company with a lower budget may ask for this to be reduced to 600 Euros.
Obviously, consultants with rich niche expertise can demand more and are better at negotiating, being aware that experts with their skills and expertise are difficult to find. The same can be said about specialists boasting an experience of over 20 years with a rich portfolio of successfully completed projects.
What are per diems?
Per diems are daily allowances that are paid to consultants separately from the agreed fees to cover any extra expenses that they may incur when providing their services. Per diems are budgeted independently from payment rates and can be used to pay for accommodation, meals, and transport in the project’s host country.
By giving consultants a flexible way to pay for daily expenses, per diems contribute to the efficiency and fairness of project budget management.
At the same time, it is worth mentioning that per diems do not apply to international travel, and that travel days are not considered to be working days, according to EU rules. This means that consultants are not compensated for time spent traveling although each individual case must also be considered, and there are situations when organizations will count travel days as working days.
The EU has issued a list of per diems (which is regularly updated) for every country in the world to provide a picture of calculated per diem rates.
However, due to financial limitations, it is not uncommon for an implementing firm or organization to decide to reduce the per diem allowance. As a result, payments may not match the official rates in their country.
International consultants typically receive compensation in advance for their services but, depending on how long the project will last, the precise terms of payment may change. This sort of agreement is usually negotiated between the consultant and the contracting company.
Written by Daniil Filipenco - read the original article here