Expert guide to consulting fees and per diems from DevelopmentPeople recruiters

Many organizations turn to consulting services to gain expert guidance and support in achieving project objectives, enhancing operations, optimizing aid effectiveness, and addressing or preventing specific problems. Because each organization and project has distinct goals and challenges that require consulting solutions, the cost of these services will be tailored to each situation.

Pricing products is easier than pricing services because tracking the manufacturing costs of goods is more straightforward. In contrast, assessing the value of time, skill, and expertise involved in delivering services is highly personalized. This explains why consultants charge varying fees and per diems. This article explores the insights and experience of DevelopmentPeople, an organization that regularly recruits consultants and possesses extensive knowledge of fees and per diems.

What is a consulting fee?

This article offers insightful analysis and practical recommendations regarding the fees and per diems for experts collaborating with EU-based businesses and organizations on both short-term and long-term projects.

Defining short-term projects vs long-term projects

A typical short-term EU-funded project lasts under 260 days within a two-year implementation timeframe, whereas long-term projects, often referred to as Technical Assistance projects, are more comprehensive and require a full-scale commitment to achieve specific objectives.

Long-term projects are compensated monthly, while short-term tasks receive daily payment.

For short-term projects, compensation consists of a daily rate plus a daily allowance. On the other hand, consultants on long-term projects receive a monthly salary, which can sometimes be enhanced by a monthly allowance.

Daily consulting fee levels

In international development consulting, various factors influence the determination of a daily fee, with experience being the most significant factor. In this field, the experience aspect is categorized into three distinct groups: the first group includes experts with at least 12 years of experience, the second group comprises those with six or more years, and the third category consists of individuals with three or more years of experience.

Source: DevelopmentPeople

Nonetheless, other factors may influence the rate. Consultants with a globally diverse portfolio indicate that European-based companies tend to charge less than those in the U.S. or Asian nations.

Consultancy fees based on location

The location of a consultant significantly influences the financial terms of their engagement. Consequently, consultants from different areas may have varying daily rates, often affected by the differences in living costs worldwide.

Professionals from developed countries, where living expenses are generally higher, often seek compensation that aligns with the financial demands of their environment. This approach is a pragmatic choice to sustain a suitable standard of living, rather than merely reflecting personal preferences. Consequently, their daily rates may be significantly elevated to match the economic conditions of their area.

On the other hand, consultants from developing countries, where the cost of living is generally lower than in developed nations, may be more inclined to accept relatively modest daily fees. It is important to understand that these lower fees do not reflect a lower quality of expertise; rather, they are largely a consequence of the economic conditions prevalent in their region.

Ultimately, the most successful consulting engagements occur when the parties openly and transparently negotiate a mutually beneficial pay structure.

Consultancy fees based on the sector

A consultant's fee is also affected by the industry they work in. For example, a finance expert is generally paid more than someone in agriculture. The critical nature of financial decisions and operations justifies higher fees due to their potential significant financial impact. While agriculture is equally important, it may necessitate different skill sets that could lead to lower fees.

This is also applicable to consultants working in the banking, human rights, and legal sectors, where DevelopmentPeople’s recruiters note that EU-based companies provide the most competitive rates. Fees for consultants in these areas are generally at the higher end of the spectrum.

There are instances when further negotiations on fees are necessary between an organization and a consultant, even if the consultant has provided a fixed rate. This is especially true when the organization has already set a specific budget to hire an expert.

For instance, a consultant initially charged 650 Euros per working day for a past project, but during negotiations, a company with a tighter budget might request a reduction to 600 Euros.

Consultants with extensive niche expertise can command higher fees and negotiate more effectively, knowing that professionals with their skills and knowledge are rare. This also applies to specialists with over 20 years of experience and a substantial portfolio of successful projects.

What are per diems?

Per diems are daily allowances provided to consultants in addition to the agreed fees to cover additional expenses incurred while delivering their services. These allowances are budgeted separately from payment rates and can be used for accommodation, meals, and transportation in the project's host country.

Per diems enhance the efficiency and fairness of managing project budgets by providing consultants with a flexible method to cover daily expenses.

At the same time, it should be noted that per diems do not apply to international travel, and according to EU regulations, travel days are not counted as working days. As a result, consultants are not paid for the time spent traveling. However, each case should be evaluated individually, as there are instances where organizations may consider travel days as working days.

The EU has issued a list of per diems (which is regularly updated) for every country in the world to provide a picture of calculated per diem rates.

Due to financial constraints, it's common for an implementing firm or organization to opt for a lower per diem allowance. Consequently, the payments might not align with the official rates in their country.

International consultants are generally paid upfront for their services; however, the specific payment terms can vary based on the project's duration. This type of agreement is typically negotiated between the consultant and the contracting company.