Advertising labor rates remain stable, despite ongoing concerns among agencies
Billing rates by agencies to clients has been an ongoing concern in the ad industry, with agencies obliged to cutback on staff and resources when clients reduce agency compensation or scope of work.
Despite concerns within the industry, the ad agency trade association 4A's, released an updated hourly labor billing rate information report today citing that 2016 labor billing rates in the advertising industry are generally higher than those in 2014.
"One of the most frequent questions we get from members is about information on current market-based labor billing rate ranges; this information is critical for the industry to benchmark billing rates and track how they change over time," said Tom Finneran, executive vice president, Agency Management Services, 4A's. "Agency compensation continues to be a hot topic of discussion, but looking at this report, it is clear that agency billing rates have remained relatively stable. This means that when clients reduce agency compensation, it leads to agencies reducing staff on accounts and scopes of work."
The 2017 survey found that, for larger New York City-based agencies, the highest reported billing rates are for the positions of chief creative directors ($775 – $849), executive account planning directors ($528 – $541), account service directors ($540 – $598) and executive media directors ($493 – $500).
During the past two years, labor billing rates have increased for technical, analytics, project management and public relations positions. These rate increases were primarily in the mid-single digit range. Further, agency-blended mid-point average hourly rates in 2016 were $155, a two percent increase from the 2014 average of $152.
An increase in mid-range average billing rates was cited among account executives $110 (+3%), art director $142 (+2%), copywriter $134 (+2%), media planner $113 (+4%) and media buyer $105 (-1%).
The survey reviewed actual hourly rates agreed upon between agencies and clients in 2016 and provides labor billing rate information, which will enable industry constituents to satisfy due diligence responsibilities through marketplace-based information. The results of the new Labor Billing Rate Survey reflected hourly rates billed by 366 agency offices reporting on 111 positions within 16 service departments encompassing 34,000 billing rate data inputs. The findings of this report include industry-wide guidance on market-based labor rates.
Agency labor rates are derived based on a range of considerations including but not limited to: agency reputation, pricing policies, services provided, market forces, rate cards, budgets, agency cost, value provided, opportunity cost and negotiated rates. The common denominator for framing labor rate ranges, regardless of how the rates were derived, is by reviewing actual rates charged, 4A's explained.