Fees & Salaries in the design professions 2014

Transcription

1 THE VOICE OF PROFESSIONAL DESIGN Fees & Salaries in the design professions 2014 Members' notes to accompany Practice Note 014 Issue I May 2014

2 Fees & Salary Survey Notes Fees and salaries in the design professions 2014 This report comments on the findings of the most recent DIA Fees & Salary Survey circulated in December 2013 and published in A complete presentation of the information collected is available in two Practice Notes: Fees & Salary Survey PN 014 (Issue I) and Graduate Salaries PN 024 (Issue G). Oversupply and Market Conditions Collide The trading conditions revealed in the data from the December 2013 survey are conditions that no designer starting in business after the mid 1990s will have experienced. The figures show a text book illustration of the way SWOT Threats can affect small business: a collision of external forces outside the small business owner's control that drastically affect business viability. While a slow decline in earnings for self employed designers was evident during the Howard/Liberal years of 1996 to December 2007 it was partially masked by years of steady economic growth. The onset of the Global Financial Crisis (GFC) in 2007 and its peak in late 2008, with the announcement of federal government bank guarantees and an economic stimulus programme, clearly mark the turning point for the service industry design sector. As business conditions and confidence progressively collapsed under the global flow-on effects of the GFC and the political turmoil of the Rudd/Labor Government (Dec June 2010), the design sector, fuelled by oversupply of capacity and the trading decline of its client sectors, went into decline. The decline accelerated under the Gillard/Labor minority alliance with the Greens (Aug ). Voter disillusionment with rising federal government expenditure, debt and a political focus increasingly hostile to business finally brought about a change of government in September While the change of government to the Abbot/Liberal Government saw an early lift in business confidence, the fortunes of the design sector rely on a rebuilding of business activity in its host industries before a lift in design consultancy or design employment can occur. This is likely to be a slow process extending over several years and is unlikely to result in a re-establishment of earning levels of the early Meanwhile the underlying conditions of excess supply in the design occupations will get progressively worse as experienced designers become displaced from employment and are forced into self-employment, and displaced employees from related occupations that compete with the professional design sector gravitate toward self-employment. Design continues to be a popular choice for tertiary education further fuelling this picture of decline or, at best, slow recovery. Design Sector Differences The economic pictures for each of the three main streams of professional design services (visual communication, built environment, and manufacturing) normally have clearly identifiable differences. But with significant economic disruption across all business sectors, and a general loss of business confidence, the specific challenges for each design service have become less of a focus. Graphic design (visual communication) is grappling with the global change to digital communication which entails the loss of major areas of business activity and the sharing of available work with many more occupation areas. Large areas of design work are being swallowed by software and template based alternatives delivered by largely non-australian sources. The focus of marketing has shifted to on-line communications with a process focus rather than an aesthetic focus. This has exposed graphic design to a new group of competitors with little concern for, or even awareness of, design. The loss of manufacturing activity in Australia also reduces requirements for graphic design services. The demand for interior design along with architecture has had a difficult five years. Interior design has a broad client base in the built environment ranging from domestic dwellings, retail premises, commercial premises, offices, health-care facilities, education, and government premises. This spread across multiple sectors, and the ability to contribute to both new construction and refurbishment, are factors that normally smooth the demand for interior design. With many sectors down, and only some benefitting from government stimulus, incomes are down. The news for interior design is less troubled than graphic or industrial. The scale of the construction industry and its relative insulation from external competition will see a recovery of business conditions for interior designers in the medium term. The outlook for various sectors and individual states can be markedly different. Commercial and industrial building has been dropping from a peak in 2008 and continues to decline. Multi-unit apartment construction is growing. Institutional building is showing slow growth. Domestic dwelling construction is moving back towards growth. Hotels and resorts are set to grow after contraction during the GFC. Restaurants are posting good growth. David Robertson & the Design Institute of Australia Design-General PN 014/Issue I Notes 1

3 PN 014 Issue I Notes Design-General Industrial Design Takes a Hit Trend of design income relative to AWOTE This is the first survey that clearly flags a collapse of income for industrial designers, with the average income of a self employed or business owner industrial designer dropping sharply to $88,100. Traditionally the average industrial design business owner has enjoyed income levels above the 'all disciplines average'. This survey shows this gap evaporating. Industrial design fees have also declined with the median figure reverting to $100ph, well below the 'all disciplines' figure of $120, and effectively back at 2008 levels. The range of consulting rates between Assistant Designer, Designer (5 Yrs) and Senior Designer is $15 less than the industry average and at least $30 less than the industrial design spread in the 2011 survey. This illustrates an inability to sell services at previous consulting levels. Industrial design consulting is a mature service sector business that peaked briefly at a high of around 390 businesses at the end of the Howard/Liberal years. Counts of industrial design businesses through the late 1990s and early 2000s remained static at around 350 and, notwithstanding difficulties in obtaining counts with reduced Yellow Pages directory use, have subsided back to this number in the last six years. Many industrial design businesses have been operating since the 1970s and 1980s. The progressively diminishing availability of manufacturing clients has depressed new business formation. Although difficult to measure, individual freelance designers are taking a larger proportion of work that previously fed consultancy businesses. The manufacturing sub-sectors suitable for industrial design services have been under severe pressure from the high Australian dollar in the last few years. Closures of client businesses continue to be announced, the most significant being the scheduled closure of GMH and Ford in These conditions would normally suggest a faster reduction of design business numbers. It is probable that as the principals of these older businesses reach retirement significant reductions in business numbers will occur. Self Employed Designers Earnings Continue to Drop The evidence that the incomes of self employed designers and the owners of design businesses have declined since the GFC, and under several years of regressive federal economic policy, has been strongly reinforced in this survey. The All Design Disciplines average income for this group was $86,700 in 2011, down from $91,200 in the 2008 survey. In the 2013 survey it fell further to $75,000. This is now around parity with AWOTE, which means that for the average self-employed designer there is no return for the risk of establishing and maintaining a business: a very poor outcome in an economy that is counting on small businesses in the services sector for future employment. The graph 'Trend of design income relative to AWOTE' takes the average salary surveyed for a business owner/ self-employed designer and shows it as a proportion of AWOTE (Average Weekly Ordinary Time Earnings). In the DIA survey this bundle of people is weighted towards the micro and small businesses that make up the bulk of the design sector. Their fortunes are directly affected by the amount of design work available in the community. The Designer (Self Employed) trend shows that self employed designers incomes have drastically reduced under the effects of global uncertainty and government uncertainty in Australia. They are the lowest they ve been in the last 10 years. The average Designer salary (5 years experience) has declined more sharply as salary raises are delayed and new employees are offered lower salaries. Graduate salaries have subsided more steeply to 0.54 of AWOTE. Design Fees Stall at A$120 The slowing of fees growth since 2006 reported in the last survey has become worse. Fees have effectively stalled at 2010/11 levels. The median fee charged for an experienced designer has remained at a value of $120 per hour (GST not included). Fees growth has slowed over the last five years, however the median value of $120ph has been established in most states. The graph 'Fees trend relative to AWOTE' illustrates the actual decline in real fees value since The All Cities average fee is very slightly below the median at $ per hour. Queensland was once again the state with a significantly higher average 2 David Robertson & the Design Institute of Australia

4 Fees & Salary Survey Notes Fees trend relative to AWOTE Graduate & Designer (5 Yrs) salary fee figure than the national median. For a complete illustration of these figures see Table 10 in Practice Note 014 (Issue I). Design managers should note the average fee envelope bracketed by Assistant Designer and Senior Designer of $100ph to $150ph. This range represents the most common span of fee values in design consultancy as of December The expected rise of Designer hourly fees at December 2012 (A$125) and December 2013 (A$130) based on the trend to 2011 did not occur. With business uncertainty still plaguing multiple sectors average Designer hourly fees will struggle to reach $125 by For an illustration of the relative differences between design disciplines see Table 9 in Practice Note 014 (Issue I). Graduate Designer Salary The average Graduate Designer salary at December 2013 was surveyed at A$40,300 (0.539 x AWOTE). This represents a progressive weakening against the ABS Average Weekly Ordinary Time Earnings (Original) for a full time adult employee. In December 2006 the Graduate Designer salary was of AWOTE. In December 2008 it was and in December 2011, The DIA surveyed average figure sits $4000 below the Graduate Architect award rate and currently represents 124.5% (down from 129.5%) of the National Minimum Wage. For a more detailed picture of the relative differences between design disciplines see Practice Note 024 (Issue G) Graduate Salaries. The graph 'Graduate & Designer (5 Yrs) salary' shows a trend plot of designer & Graduate average salaries showing a marked departure from the AWOTE trend. Industrial design graduates still have the highest median salary at $44,500. Average Designer Salary and AWOTE The DIA uses the benchmark of a designer with 5 years experience as the central reference point of its salary reporting. Historically Designer (5 Yrs) has been the surveyed figure that relates most closely with our selected AWOTE reference point. AWOTE is an ABS measure of the average wage in Australia. For much of the last decade the surveyed national average figure of Designer (5 Yrs) has subsided below AWOTE. In the current survey this trend has worsened. Historically industrial designers have been at, or slightly higher than, AWOTE with the average lowered by weaker interior design and graphic design salary levels. In the current survey industrial design has also dropped below the AWOTE benchmark. The average salary for Designer (5 Yrs) was surveyed at $62,500 (83.6% of AWOTE, down from 90.2%) with an identical median value of $62,500. These figures do not include superannuation. The selected AWOTE reference converted to an annual figure for the same period as the survey was $74,724. In 2006 Designer (5 Yrs) was 96.1% of AWOTE. The long term reasons for the departure from AWOTE are complex and include the differences in wage levels of the various design disciplines, the viability of the industries they service, the number of new entrants to the design professions, David Robertson & the Design Institute of Australia Design-General PN 014/Issue I Notes 3

5 PN 014 Issue I Notes Design-General the variations state to state and the bias of the data collected by the DIA survey. However in recent periods there have been significant upward pressures on AWOTE from mining and public sector employment which exaggerate the apparent fortunes of designers. The specific AWOTE reference used by the DIA as a consistent comparison has been the ABS Average Weekly Ordinary Time Earnings (Original) for a full time adult employee and includes both private and public service employees. Design managers should consider the relationships between the DIA surveyed data for their state and discipline and relate it to the state and industry sector benchmarks available in the ABS Average Weekly Earnings reports to establish benchmarks for their own businesses. Interior designers also have the Architects Award 2010 as a reference point. Designer (5 Yrs) salary by capital city AWOTE by state Average Designer Salary State by State The DIA survey Practice Notes report on the state averages and medians for Designer (5 Yrs). This is offered as an illustration of the relative salary levels state by state with reference to the published All Cities average. This has been reported on since the 2006 survey and its stability has been affected by the smaller data sets collected from some states. Nevertheless it reveals broad trends for designers that can be at odds with whole-of-community ABS data. The graph 'Designer (5 Yrs) salary by capital city' illustrates the relative surveyed salary level in six Australian capitals compared to the surveyed average Designer (5 Yrs) salary for All Cities expressed as 100%. The plots point to the significant effects of the two speed economy, with Perth overtaking Sydney in 2011 for the highest average designer salary. Western Australian designers have continued to benefit from the high state wage averages but since 2011 QLD designers have fallen back. By 2011 Melbourne salary levels settled to the national average then rose to match Sydney's in It will also be noted that the consistently high average wage level in ACT, driven by public sector employment, does not flow through to the private sector designers in that state. Design managers should note that the previous 2011 survey suggested that for Sydney, Canberra and Adelaide, the adjustment factor for the benchmark wage level of Designer (5 Yrs) remained as in previous surveys at 106%, 95% and 85% respectively. Difficult economic conditions and imbalances in the performance of industry sectors and states have disturbed this pattern greatly with the correction factors for the 2013 survey being 103.4%, 79.5% and 90.1% respectively. Comparisons between DIA surveys of the design sector and ABS state AWOTE rankings illustrate the principle of the relative salary levels state to state but also show that other factors affect how closely these are linked for the design sector. Interior Design Percentage Fees Correct DIA surveys shows clear evidence of the depressing effect of the economic conditions on percentage fees in the interior design sector. The graph plots the All Project Types average for the last four survey periods. This is made up of the commercial areas of Office and Retail, and the domestic area of Residential. It should be noted that each of these three areas are affected by the current climate differently. Design managers should refer to the breakdown in Table 14, PN 014 to plot the specific trend for their sectors of interest. 4 David Robertson & the Design Institute of Australia

6 Fees & Salary Survey Notes Trend in percentage design fees by project value business. A cut-off figure up to which hourly rates are used should also be set (see shading from the left hand scale inward). Once again a majority of interior designers providing information for the survey indicated a use of percentage fees, however a third of these also indicated that they applied hourly rates for lower value projects where possible. The full salary survey report (PN 014 Issue I) tabulates the relative use of hourly rates for lower project values providing some guidance on the acceptability of this in the three project areas. Table 14 indicates that this practice is still most commonly applied in the Residential area. Percentage fee quoting curves 2014 The revised 2013 version of the survey and its on-line variant may have altered designers' responses to the Percentage Fees question. However a similar proportion of interior designers answered the question. Percentage of Australian businesses by state The top graph illustrates the contraction of percentage design fees since the December 2006 survey. The plots are the 'All Project Types' averages from Table 14. While the 2013 averages plot suggests a lift in low project values and values over a million dollars the median figures returned suggest that this apparent lift is not the experience of the majority of interior designers. The graph 'Percentage fee quoting curve' shows a method of using this data for establishing a quoting curve to suit your business situation. The graph is an illustration of the average fee quoted and also shows the more stepped trend line of the mean whole number figure used by many interior designers. This graph proposes a potential quoting line that can be used to test the best fee return for a particular project value. The object is to reduce fee losses inherent in stepping from one whole % number to another between similar project values, as illustrated by the gap between the median or average line and the smoothed quote test line. Use this method to set a preferred quote line and quote at or above this line on a sliding scale adjusting the curve for market feedback relevant to your Relative Design Market Size The above graph is a profile of business distribution in Australia. It shows the relative size of market available to designers in Australia's states and territories. The graph is an illustration of ABS counts of employing and non-employing businesses as at June The average design business in Australia responding to the DIA survey in 2004 consisted of 4.1 designers and owners, in designers and owners, in and in In the 2013 survey it is 3.9 people. Currently around 60% of design businesses have 3 designers and owners or less. The median business size even when support staff is included is 3 people. David Robertson & the Design Institute of Australia Design-General PN 014/Issue I Notes 5

7 PN 014 Issue I Notes Design-General The size distribution of design businesses mirrors the size distribution of the general business community. These graphs show the close correlation between the size distribution of design businesses responding to the DIA survey with the distribution of businesses in the Australian business community. The Australian Business Size profile shows ABS business counts of the 815,368 employing businesses in Australia at June The Design Business Size profile shows the 2013 Designers and Owners percentage responses from Table 11 firstly plotted for the equivalent size segments and then overlaid with the relative percentage results for businesses of 1 to 8 people. These plots indicate the relative lack of large customer businesses for designers in Australia and the lack of large design businesses. Distribution of design businesses relative to Australian businesses David Robertson AM LFDIA Design Institute of Australia 6 David Robertson & the Design Institute of Australia

8 Fees & Salary Survey Notes Disclaimer and copyright notice Important information concerning this material please read. This material is designed to provide general information for members on design practice. Because business circumstances can vary greatly, this material is not designed to provide specific or business advice for particular circumstances. Also, because aspects of business and employment and law are complex the material is not designed to comprehensively cover all aspects of business practice for small and medium enterprises. Further, the laws and rulings and decisions under those laws, may change. Before you rely on this material for any important matter for your business, you should: make your own enquiries about whether the material is relevant and still current, and whether it deals accurately and completely with that particular matter; and as appropriate, seek your own professional advice relevant to that particular matter. This material is provided on the understanding that neither the Design Institute of Australia, David Robertson, or its officers, or its members or advisors involved in developing or delivering the practice notes is thereby engaged in providing professional advice for a particular purpose. These limitations and warnings also apply to information based on this material presented at any seminars or workshops provided by the Design Institute of Australia. The Design Institute of Australia also expressly disclaims all liability and responsibility to any person who relies, or partially relies, upon anything done or omitted to be done by this service. The DIA and David Robertson jointly own the copyright in this document and copies may not be made or distributed without the permission of the National Office of the DIA. Design Institute of Australia ABN National Office Level 1, 175 Collins Street Melbourne VICTORIA 3000 Australia GPO Box 355 Melbourne VIC 3001 Phone Fax (03) Web site admin@design.org.au David Robertson & the Design Institute of Australia Design-General PN 014/Issue I Notes Icarus Design - PN 014 Fees and Salaries I Member's Notes.indd 7