The World Federation of Advertisers says labour-based agency remuneration is losing ground as brands move toward fixed-fee, output-based and performance-linked models.
The shift matters because AI is making the old relationship between time and value less reliable. Agencies can produce some work faster than before, but marketers still need a way to price strategic judgment, quality, accountability and business impact.
Key Takeaways
- Labour-based agency remuneration has fallen sharply over the past 15 years.
- APAC is the region most oriented toward fixed-fee and output-based models in the new research.
- Most brands expect AI to change commercial models, but only a minority have already changed them.
Table of contents
Jump to each section:
- Labour is losing its place as the default unit of agency value
- APAC is furthest toward output-based pay
- AI makes time-based billing harder to defend
- Outcome-based models still need better definitions
Labour is losing its place as the default unit of agency value
The new research, developed by WFA and Agency Mania Solutions, looks beyond agency fees to the wider commercial relationship between brands and agencies, including briefing, scoping, ways of working, performance and payment.
17% of respondents now use labour-based remuneration as their standard model, down from 54% in 2011, according to WFA and Agency Mania Solutions.
At the same time, fixed-fee and output-based models have become more common. That does not mean brands have settled on one replacement for hourly billing. The market is fragmenting into several approaches depending on the work, the ability to measure performance and how much commercial risk each side is willing to take.
35% now use fixed-fee or output-based models, while 23% use labour-plus-performance structures, according to reporting on the study.
The survey covers multinational advertisers rather than the entire agency market, so the findings should be read as a signal from large global buyers. Even within that group, the direction is clear: hours and headcount are becoming a weaker proxy for value.
APAC is furthest toward output-based pay
The regional split is especially relevant for agencies and marketers operating across Asia Pacific.
44% of APAC respondents use fixed-fee or output-based remuneration, compared with 32% in Europe and 29% in the US and Canada, according to Marketing-Interactive.
That makes APAC the clearest test bed in the research for a model where the client defines what must be delivered and pays for the agreed output rather than the hours used to produce it.
The commercial upside is straightforward: better execution efficiency does not automatically reduce agency revenue if the client is buying a defined result. The harder part is scope. A poorly defined output can simply move the argument from timesheets to change requests.
For regional teams, this becomes more complicated when one agency relationship spans markets with different production costs, media systems and localization needs. An output model only works if the contract makes clear what is standardized, what varies by market and what triggers additional fees.
AI makes time-based billing harder to defend
AI is the pressure point that makes this debate more immediate.
Only 20% of respondents say they have already evolved their commercial models because of AI, while 61% intend to, according to the WFA research coverage.
That gap shows why agency remuneration is becoming an operating-model issue. Brands may already be asking agencies to use AI in planning, research, production or optimization, while the contract still assumes that more hours mean more value.
AI does not automatically justify lower fees. Faster execution can reduce production effort, but it can also increase the amount of senior review, governance, integration and experimentation required. A useful contract has to distinguish between work that became cheaper and judgment that remains scarce.
Agency Mania Solutions co-founder Bruno Gralpois has described strong partnerships as requiring alignment and shared purpose. That point becomes more important when remuneration changes, because a pricing model cannot compensate for unclear ownership or weak briefing.
Outcome-based models still need better definitions
Performance-linked pay sounds attractive because it aligns agency compensation with business results. In practice, attribution makes it difficult to apply across every discipline.
Media buying has clearer performance signals than many brand, creative or communications assignments. A campaign outcome can also depend on pricing, distribution, product quality, sales operations or market conditions that the agency does not control.
That is why marketers need to separate three questions: what the agency delivers, what the brand controls and which outcomes both sides can reasonably influence.
The WFA findings also suggest that financial incentives are not the main determinant of agency performance. The public report page ranks briefing, respect, trust and feedback above remuneration as performance drivers.
For procurement teams, the practical next step is therefore broader than replacing hourly rates with a new formula. Contracts need tighter definitions of scope, decision rights, quality standards and measurement before more compensation can safely be tied to outputs or outcomes.
The agency model may be moving away from time, but the replacement still depends on something old-fashioned: both sides agreeing what good work actually looks like.
