Global brands are moving away from labor-based agency pay, with only 17% of multinationals now using it as their standard remuneration model, according to research from the World Federation of Advertisers and Agency Mania Solutions.
The share of companies using labor-based models fell from 54% in 2011 and from 33% in 2022, while fixed-fee and output-based models rose from 20% to 35% over the past 15 years and labor-plus-performance models increased from 9% to 23%.
The study surveyed 69 multinational companies across six industries with a combined global marketing spend of $147 billion. Some 71% of respondents work in global marketing procurement.
Performance-based fees are expected to record the strongest growth, with 58% of respondents saying they plan to increase their use. Value-based models followed at 43%, while 36% expect to expand fixed-fee or output-based approaches.
AI is expected to speed the shift away from time-based remuneration as agencies produce more work in less time. Only 20% of respondents said they had already changed their commercial models in response to AI, while 61% said they intended to do so.
Performance-based remuneration still accounts for a limited share of total agency fees across most disciplines. Between 64% and 80% of respondents said performance-based pay makes up less than 20% of total agency compensation.
Adoption is highest in media-related disciplines, where performance is easier to measure. Labor-plus-performance models account for 41% of media planning, 34% of media buying and 30% of paid social arrangements.
Regional differences were also evident in the survey. Asia Pacific had the highest use of fixed-fee or output-based remuneration at 44%, compared with 32% in Europe and 29% in the United States and Canada, while labor-based models remained most common in the United States and Canada at 38%.
Average agency tenure has increased across creative, production, media and paid social since 2018. Paid social recorded the largest increase, rising from two years to 4.3 years.
At the same time, 36% of respondents said agency relationship management had become more difficult, compared with 12% who said it had become easier. The report cited more stakeholders, more complex scopes, faster timelines and higher expectations around data, technology, integration and transparency.
The research also examined what drives agency performance beyond remuneration. Great briefing ranked highest at 5.6 out of six, followed by respect and trust at 5.2 and high-quality feedback at 5.1, while financial incentives scored 3.9.
The report found a gap between perceived value and cost visibility. While 89% of brands said they receive value for money from agencies, only 45% said they have sufficient transparency into agency costing and profitability.
Global contracts were most common in media, with 67% of respondents using them for media planning and 61% for media buying. By comparison, 49% to 52% used global contracts for integrated creative and creative agency-of-record relationships.
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