In our prequel to this topic we looked at all the aspects to consider in finding the answer to the question of a reasonable rate for an OHS consultant. In this article, we will compare the consulting rate with the cost to company of a full time OHS manager in South Africa.
First of all, let’s look at the average salary of a person with the job title of OHS Manager.
According to two sources, Payscale.com, and Indeed.co.za the combined average salary (Not Cost to Company – CTC), is R409 050 per year. The average salary for the equivalent in the USA according to Glassdoor.com, is $75 126 per year, or R1 082 847.38.
There are 180 hours per month and these averages therefore equates to R189.37 per hour.
Now you have to add the Cost to Company if you have a full time employee as an OHS Manager.
CTC includes benefits like Medical Aid, Pension Fund, Travel Allowance or Company Car, Telephone Allowance, CPD and Training costs, Leave Pay and other forms of Leave required by the BCE Act.
Let’s assume for the purposes of this article the CTC for a Full time OHS Manager then amounts to R284 per hour (CTC x 1,5)
Now let’s look at the OHS Consultant and how the rate of R284 per hour will pan out in a properly designed costing model.
The Full Time OHS Consultant
Let’s make it clear from the onset that the OHS Consultant is an OHS Manager (with similar experience) and not a less experienced individual like an OHS Co-ordinator or Officer. We are comparing apples with apples.
Contrary to a full time employed person, the consultant picks up his/her own tab for all the benefits offered to a full time employee, and they are 100% responsible for the cost thereof. The CTC rate of R284 per hour will thus not decrease in these instances.
However, there is a difference between working hours and billable hours. A consultant has at a maximum 6 hours in a day to generate the same income as a full time employee. The billable rate is therefore higher than the standard rate of R284 per hour at R378.66.
On top of this, we need to add Business overheads.
Remember that a full time employee uses company resources like telephone, internet, office space, and lag-time (non-productive time), which the OHS consultant also need to be in business.
The business overheads are to be included in the hourly rate as a percentage of the total annual overheads. (the factor on the right represents the % allowed for.)These costs are common business overheads a consultant has and includes the following:
|Salaries (total cost of employment as CTC) of fee earning staff.||1|
|Salaries of non-fee-earning staff, i.e. administrative staff salaries||0.24|
|Telephone and communication||0.05|
|Rental of premises, including water, electricity and rates||0.13|
|Transport (not recovered directly from projects)||0.05|
|Paper, stationary, consumables||0.03|
|Audit, bank charges, interest, insurance||0.08|
|Training and development||0.02|
|Project direct expenses not recoverable||0.08|
|Other (i.e. Head office expenses)||0.14|
|Nett overhead factor (before mark-up for profit)||1.9|
Calculating the Base rate excluding mark-up (profit) compared with the average salary of Full time employees above.
[R409 050/ 1760 hours per year] x [1.9 to cover overheads] = R441 hr.
If we allow a 2.5% mark-up, the base rate is R452,03 per hour.
If you are quoted anything less than this rate, you are not paying for the experience at OHS Manager level and your consultant is not sustainable. You may find yourself in a situation where you change consultants more than twice a year, leaving you with additional costs due to service interruption, loss of information, etc etc.
It is important to question the experience of the consultant and use the formula set out above to determine if you are getting what you are paid for.
The base rate may increase due to specialist knowledge and is only based on the average skills and qualifications of a survey of 56 salaries submitted to the sources quoted. Applying the upper level of the more experienced individuals or a person with executive experience will impact on the base rate.