Over the last two years, we have seen consulting salaries rise considerably, disrupting the usual salary structures we’re accustomed to. Now, candidates and employers alike are questioning the impact of these unprecedented increases.
In this article, we will explore the reasons why salaries have increased, the implications of rising consulting salaries and the potential strategic responses that may shape the industry’s future.
Why have consulting salaries increased?
In the past couple of years, consulting salaries have seen considerable jumps, disrupting the conventional norms of pay reviews.
The surge in salaries can largely be attributed to the disruption caused by the pandemic and the events that followed. For instance…
- In 2022, consultancies expanded rapidly, resulting in an unprecedented rise in pay brackets as they competed for the best talent on the market.
- In 2023, inflation resulted in the cost-of-living crisis, putting even more pressure on consulting firms to increase pay in order to attract and retain talent.
Larger consulting firms took the lead in this shift, prompting smaller firms to adjust their salaries in order to remain competitive and continue to recruit.
How the Manager bracket has changed
To understand the true extent of these increases, let’s take a look at how a Consulting Manager’s salary has increased over the past few years at one firm.
2020: A baseline salary of £70,000
In 2020, a leading consultancy’s Manager bracket commenced at £70,000.
2021: A baseline salary of £75,000
By 2021, this bracket had increased by more than 6% to £75,000.
2022: A baseline salary of £80,000
Fast forward to 2022, and the bracket has soared to just shy of £80,000. On top of this, Managers also receive includes additional perks such as bonuses and car allowances.
The impact on Senior Manager salaries
We have seen a parallel narrative for the Senior Manager title. Entry-level compensation has soared from approximately £85,000 – £90,000 to now eclipsing the £100,000 mark in many consultancies.
Hiring managers, if you’re surprised by these numbers or haven’t reviewed your salary brackets recently, now might be the time! Download our 2024 salary report for support with benchmarking your salaries.
What are the implications of rising salary brackets in the consulting industry?
While salary increases are good news for Consultants, a number of challenges arise across the consulting sector.
The rate card dilemma
When asked about the biggest challenge facing consultancies in 2024, Richard Longstreet, Founder at Tarka Talent said,
“I have heard from a number of consulting leaders that they haven’t yet been able to pass this increase onto clients through the rate cards (particularly in larger firms with multi-year, high volume agreements). This is obviously squeezing margins. Unfortunately, larger firms have reacted by making redundancies, implementing hiring freezes and letting attrition regulate headcount.”
Client experience is at the forefront of consultancies’ strategies. So, how will firms react to solve this challenge? Here are four proposed solutions:
1. Role flexibility
One possible response to cost pressures involves consultancies adopting more flexible staffing structures. We could witness a surge in Consultants being billed at more senior rates, taking on roles traditionally reserved for higher positions. For instance, a Senior Consultant assuming a Managerial role on a project.
This is often a factor in promotion decisions, but could this become more common in order to solve these cost implications?
2. Multitasking Consultants
Another plausible scenario is consultants working on multiple projects simultaneously, strategically dividing their week. This approach could offer perceived value to clients and prove to be an effective way for consultancies to optimise resource.
3. Value-based pricing models
In the quest to balance the books, consultancies might pivot towards more value-based pricing structures. Imagine a scenario where the fee is directly tied to the value delivered – “if we save you ‘x’, we’ll charge ‘y’, but if we save ‘2x’, we’ll charge ‘2y'”.
This approach aligns the consultant’s compensation with the tangible outcomes they generate for the client.
4. Rise of internal consulting functions
Facing the prospect of increased consulting fees, some industry firms have already taken matters into their own hands by establishing internal consulting functions.
Poaching top talent from external consultancies, these internal teams aim to reduce overall consulting spend. Could this trend continue as a strategic move by end clients seeking to mitigate the impact of rising consulting costs?
The future of consulting
The next chapter in consulting promises to be a dynamic one, where adaptability will be key in navigating the evolving relationship between consulting firms and their clients. The coming years will unveil which strategies prove most effective in striking the delicate balance between delivering value and managing the bottom line.
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