News analysis: Recruiters spot rebound in agency directors' pay

The improving economy means a recently reported drop in agency directors' remuneration is unlikely to recur, according to recruitment chiefs.

Remuneration: directors' salaries are expected to rise from next year (Credit: Thinkstock)
Remuneration: directors' salaries are expected to rise from next year (Credit: Thinkstock)

Directors of the top 40 PR agencies experienced an average 10 per cent drop in their overall package despite a rise in overall staff costs, according to a Kingston Smith report published yesterday.

The data was gathered from agencies’ most recently published financial reports, most of which covered 2012 though some were from 2011.

Recruiters would rather focus on the pick-up they have observed since then.

"I’m sure when the data comes out next year there will be quite a change," says Hanson Search MD Alice Weightman. This is a view shared by her peers.

Agency directors placed by The Works Search and Selection this year received an average 26 per cent increase in basic salary, well above the all-staff average increase of 14 per cent, according to its managing partner Sarah Leembruggen.

However, she links the rise to unease about performance-linked pay provoked by recent lean times.

"Movers are looking for a decent uplift in salary because they don’t feel that bonuses are guaranteed any more," she says.

Examples from the Kingston Smith survey amply illustrate how the recession ate into directors' collective remuneration at agencies such as Freuds, down 16 per cent, and Hill+Knowlton Strategies, down 21 per cent.

City agencies starved of IPO fuel were especially vulnerable. In 2012 Citigate Dewe Rogerson’s directors collectively earned only two-thirds of what they had been paid in 2011, while even the mighty RLM Finsbury was hit with a 14 per cent drop.

Weightman recalls instances of financial PR agency directors being asked to take a pay cut.

Lansons chief executive Tony Langham backs this up, relating how he made a five per cent cut to his salary and to the salaries of staff earning over £70,000 in 2010.

This example of insulating junior levels helps explain why overall staff costs for the top 40 agencies climbed despite the drop in senior pay.

Weightman thinks this happened because agencies were in cautious growth mode and therefore competing for mid-level people who could hit the ground running.

Langham’s theory is that junior staff were able to improve their salary through promotions but senior staff suffered because they were unable to win more business and client fees have been static.

It is worth noting that the 2012 figures include bonuses relating to performance in 2011 – a tough year. Fast-forward to today and many directors are expecting fatter bonuses to be revealed next month.

"Financial PR agency compensation won’t be down this year," reckons Leembruggen. "It has been a better year for them."

According to Oskar Yasar, managing partner at The Oskar Yasar Partnership, directors are restless enough to trigger a jobs rush in the next 12 months.

"There hasn’t been that much movement at senior level in the past two years because markets have been sour and what I call the musical chairs scenario hasn’t kicked in.

"People are now starting to look around and are expecting higher salaries and in some cases golden handshakes to compensate for missing out on their future bonus. And when they move their roles will need to be filled."

The sight of recruiters rubbing their hands is no guarantee of the return of the good times, but it is a start. 

Directors' emoluments at top 10 agencies (Source: Kingston Smith W1)
Year end Latest £'000s Previous £'000s Change %
1 RLM Finsbury Limited 31/12/2012 5,616 6,556 -14.34
2 Ketchum Limited 31/12/2012 4,202 3,437 22.26
3 The Red Consultancy Limited 31/12/2012 2,706 2,268 19.31
4 Lansons Communications LLP*** 31/03/2012 2,505 2,612 -4.1
5 Bell Pottinger Communications Limited 31/12/2011 2,453 3,080 -20.36
6 Fishburn Hedges Boys Williams Limited 31/12/2012 2,338 3,805 -38.55
7 Tulchan Communications LLP 31/03/2012 2,333 2,438 -4.31
8 Citigate Dewe Rogerson Limited 31/12/2012 1,770 2,658 -33.41
9 Buchanan Communications Limited 31/12/2012 1,537 1,651

-6.90

10 College Hill Limited 31/12/2012 1,516 1,613

-6.01

 ***Lansons Communications disputes Kingston Smith W1's figures for its directors' compensation. The agency claims the figures are an overestimate because they include all 32 of its partners and not just the 18 partners who are board directors. For example, it believes the 2012 figure should be lower, at £1.538 million.

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