Fractional, Interim or Permanent Executive: A Complete UK Guide

The choice between fractional, interim and permanent executive engagement is one of the most consequential decisions a business makes when bringing in senior leadership, and one of the most consistently misunderstood. The three models differ in time commitment, economics, expectations, contractual structure and the candidate market each draws from. Firms that map their need against the wrong model often get a worse outcome than firms that take a little longer to make the right choice, because the engagement model shapes the executive’s incentives, working pattern, depth of integration with the business and realistic ability to deliver what the board is asking for. Many growing businesses start with a fractional CMO for one or two days a week. For smaller businesses, a fractional Managing Director can provide part-time leadership. Where a full-time hire is premature, a fractional CEO can provide senior leadership for a few days a week. Where a business needs a chief executive at short notice, an interim CEO can step in.

This guide is written for chairs, CEOs, founders and shareholders deciding how to engage senior leadership for a specific situation. It covers the differences between the three models, when each fits, a practical decision framework, how the costs compare, IR35 and contract structure, whether regulated roles such as SMF16 compliance oversight and SMF17 money laundering reporting can be held on a fractional basis, how fractional and interim arrangements convert to permanent, and the common mistakes. For our service pages covering part-time senior leadership, see fractional C-suite recruitment and interim executive recruitment. Earlier-stage businesses often start with a fractional Sales Director working a few days a week. Where cover is needed quickly, an interim Managing Director can run the business while you recruit. Where operations need senior leadership at short notice, an interim COO can step in.

The three models, defined

Before working through which model fits which situation, it is worth being clear what each model actually involves. The labels are used loosely in the market, and a good deal of confusion in early conversations comes from a board saying “interim” when it means “part-time”, or “fractional” when it means “short-term”. Smaller businesses often start with a fractional COO for one or two days a week.

Permanent. The executive joins the business as an employee on a standard employment contract, typically with a notice period of three to twelve months, full participation in the firm’s pay and benefits structure, and indefinite tenure. The expectation is multi-year integration with the firm’s strategy, culture and operating rhythm. Permanent is the default model for senior roles where continuity matters and where the role has an established place in the executive team.

Interim. The executive is engaged for a defined period, commonly three to eighteen months, with a clear end date or specific exit criteria. The engagement is usually full-time or close to it during that period, but contractually time-bound. Interim executives are typically engaged through their own limited company, or through an agency or umbrella arrangement, on a daily or weekly rate, without employee benefits. The model fits transitions, turnarounds, transformation programmes, regulatory remediation and gaps between permanent appointments.

Fractional. The executive works part-time on an ongoing basis, often one to three days a week or a set number of days a month, and frequently works with two or three businesses at once. The engagement is usually structured through the executive’s own company on a monthly retainer or a day rate. The relationship is open-ended rather than tied to a project, so a fractional executive is permanent in the sense of continuity but part-time in commitment. The model fits businesses that need senior judgement at executive level but whose scale or workload does not yet justify a full-time appointment.

A useful shorthand is that interim is about time (a full-time leader for a limited period) and fractional is about capacity (a senior leader for a limited share of the week, with no fixed end). Permanent is the absence of either constraint.

When each model fits

The following summarises the situations each model best fits. In practice the answer is often a combination: an interim to stabilise, a fractional to carry the function while the business grows, then a permanent hire when the role has become a full-time seat.

Permanent fits when:

• The role is structurally permanent in the executive team and continuity matters over several years.
• The business has the scale and workload to justify a full-time leader, not simply the budget.
• The strategic agenda requires deep integration with the firm’s culture, customers and operating rhythm.
• The role carries a large team, day-to-day line management or heavy external-facing responsibilities that cannot be compressed into part of a week.
• The candidate market for the role is dominated by people seeking permanent roles, so restricting the search to interim or fractional would shrink the field.

Interim fits when:

• The business faces a defined transition, such as a turnaround, post-acquisition integration, transformation programme or regulatory remediation, with a clear end date or exit criteria.
• The business needs senior capability now and a permanent search is under way, so a bridge is required.
• The work is best delivered by someone chosen for prior experience of the same type of situation rather than long-term cultural fit.
• The workload is full-time for the duration, and the candidate market is organised around interim availability, as it is for senior interim CFOs, COOs and compliance leaders.

Fractional fits when:

• The business has crossed the threshold where senior leadership is warranted, but its scale does not yet justify a full-time cost or a full-time workload.
• The strategic work needs senior capability, while day-to-day execution can sit with a capable team below.
• The business is growing and expects to move to a full-time appointment later, with fractional bridging that progression.
• The role suits part-time delivery. CFO, COO, CMO, compliance officer and MLRO roles often work well fractionally; a CEO role usually works less well because the job is about constant presence.
• The firm needs a regulated senior manager, such as an SMF16 or SMF17, but the volume of compliance or financial crime work in a smaller firm is a fraction of a full-time role.

A practical decision framework

Most boards reach the right model by answering five questions in order. The answers rarely all point the same way, but writing them down makes the trade-off visible rather than leaving it to habit or to whichever model the chair has used before.

1. Is the need permanent or temporary?

If the role will still exist in the same form in three years, the eventual answer is permanent or fractional. If the need is tied to an event, such as a refinancing, a remediation programme, an acquisition or a gap left by a departure, it points to interim. Be honest about this: many “temporary” needs turn out to be the first sign that the business has outgrown its current leadership.

2. How many days a week does the work actually require?

Estimate the real workload, not the title. A growing business may need a CFO’s judgement on funding, investor reporting and controls for two days a week, with a financial controller doing the rest. A smaller regulated firm may need its compliance oversight function for one or two days a week plus availability for urgent matters. If the honest answer is four or five days, fractional is the wrong tool, however attractive the cost.

3. How quickly is the person needed?

Interim and fractional executives are generally available on shorter notice than permanent candidates, who are often tied to notice periods of three to six months or more. If the gap cannot be left open, an interim or fractional appointment may be the only workable answer for the first phase, even when the long-term answer is permanent.

4. Does the role carry regulatory approval or statutory office?

If the role is a senior manager function under the FCA’s Senior Managers and Certification Regime, the individual will need approval and must have enough time to discharge it. That does not rule out fractional or interim models, as explained below, but it adds time and makes candidate selection more important. Statutory directorships also carry legal duties regardless of how many days are worked.

5. What does the business need to own afterwards?

If the aim is to build a team, systems and know-how that remain after the executive leaves, insist on handover and capability-building being part of the brief. Interim executives in particular can solve a problem and leave nothing behind unless this is written into the engagement.

If the answers split, the usual resolution is sequencing rather than compromise: interim now, permanent later; or fractional now, with an agreed review point at which the business decides whether the role has become a full-time seat.

Common situations and which model fits

Six situations recur where the engagement-model decision matters most.

Founder-led business adding its first senior leader. A fractional appointment is often the right answer. The business has reached the point where senior leadership is warranted but usually not yet the scale where a full-time cost or workload is justified. Strong fractional CFOs, COOs and CMOs at this stage build the platform, the reporting and the team on which full-time appointments are later made. See our fractional C-suite service for the roles we place on this basis.

Mid-market business following private equity investment. Usually permanent appointments for the core management team, because the sponsor expects full-time leadership and the value-creation plan runs over several years. Fractional and interim executives still play a part, for example an interim CFO through the first hundred days or a fractional specialist for a defined workstream.

Business in turnaround or rebuilding after a failure. Usually interim. The work is defined-period and intensive, the candidate market is organised around interim availability, and the person is chosen for prior turnaround experience rather than long-term fit.

Bridge during a permanent search. An interim executive covers the period from the departure of the previous leader to the start of the new permanent appointment, often several months once notice periods are taken into account. This is the standard pattern for senior roles where the seat cannot be left empty.

Smaller FCA-regulated firm needing SMF16 and SMF17. Fractional is frequently the right answer. A small broker, adviser, investment firm or start-up seeking authorisation has to have compliance oversight and money laundering reporting covered by an approved, competent person, but rarely has a full-time workload for either. A fractional compliance officer or fractional MLRO, sometimes as a combined SMF16 and SMF17 holder, gives the firm senior regulatory experience at a proportionate cost.

Regulated firm whose SMF holder has left suddenly. Interim cover first, with the permanent or fractional decision made once the immediate gap is closed. The FCA’s temporary cover arrangements, discussed below, allow a firm to keep the function covered while an application is prepared.

Can regulated roles be fractional? SMF16, SMF17 and MLRO appointments

Older guidance, including earlier versions of this page, suggested that regulated senior manager roles work poorly outside permanent structures. That view does not reflect how much of the UK market now operates. Fractional compliance oversight and money laundering reporting roles are common, particularly in smaller solo-regulated firms, and they are among the most frequent part-time senior appointments we are asked to make.

Yes, with approval and adequate time

The FCA’s rules do not require a senior manager to be full-time. What they require is that the individual is approved for the function before performing it (subject to the temporary cover rule), is fit and proper, and can discharge the responsibilities effectively. For a fractional SMF16 or SMF17 that means three things in practice:

• Approval. The firm submits an application for the individual to perform the senior manager function. Approval is personal to the individual and the firm, so a fractional compliance officer approved at one firm still needs a separate approval at each new firm. The scope of the Senior Managers Regime and the functions that apply to each type of firm are set out in SYSC 23 of the FCA Handbook.
• Adequate time commitment. The firm and the individual should be able to show how many days are committed, what other roles the person holds, and how urgent matters such as suspicious activity reports, regulatory correspondence or breaches will be handled outside contracted days. A fractional SMF holder with too many clients is a supervisory risk for every one of them.
• Proportionality. The time commitment has to match the firm’s size, complexity and risk. A small directly authorised adviser may be well served by one or two days a week; a fast-growing payments or consumer credit business may outgrow a fractional arrangement within a year.

Combined SMF16 and SMF17 roles

In smaller firms one person often holds both compliance oversight and money laundering reporting. That can be appropriate where the workload is modest and the individual has strong experience in both areas, and it is often the most efficient way to use a fractional appointment. As the firm grows, the case for separating the two functions strengthens, especially where financial crime risk is high. Our SMF16 Head of Compliance recruitment service covers both full-time and fractional appointments.

Temporary cover while an application is made

Firms often need someone in the seat immediately. Under the FCA’s 12-week rule, a person can cover an SMF role for a limited period without approval where the absence was unforeseen. Following the FCA’s Phase 1 review of the Senior Managers and Certification Regime, set out in policy statement PS26/6, most of which took effect on 24 April 2026, the 12 weeks are the period within which the firm must submit an application, and the covering individual can remain in place while the FCA considers it. Firms should check the current rules for their own circumstances, but the change makes an interim-to-approved or fractional-to-approved pathway more practical than it was.

Firms outside the Senior Managers Regime

Payment institutions, e-money institutions and some other firms are not subject to the Senior Managers Regime in the same way, but they still need a nominated officer for money laundering purposes and competent compliance leadership, and the FCA assesses the people involved at authorisation. The same fractional logic applies: the question is whether the person has the experience and the time the firm’s risk profile requires.

Compensation and economics

The three models produce materially different economics for both the business and the executive. Rather than quote market rates, which vary widely by role, sector, location and seniority and move with demand, it is more useful to compare the components of cost. Any business can then plug in the numbers from its own shortlist.

Permanent compensation follows the standard structure of base salary, annual bonus, long-term incentives and benefits, with levels varying substantially by firm size and sector. The total cost to the business is significantly higher than base salary once employer National Insurance, pension contributions, benefits, bonus and any equity are included, and the recruitment fee, notice periods and the cost of exit if the hire does not work should all be counted. See our executive compensation guide for the detail on structure.

Interim compensation is usually a daily rate. Where the executive works through their own limited company, the business pays the rate, plus VAT where the company is VAT registered, and the executive is responsible for their own tax, National Insurance, pension and benefits, subject to the IR35 position covered below. On a per-day basis an interim costs more than the equivalent permanent salary, because the rate carries the executive’s own overheads, gaps between assignments and the absence of benefits. Over the life of a defined assignment, however, the total can compare well with a permanent hire, particularly once the cost of a wrong permanent appointment is considered.

Fractional compensation is usually a monthly retainer for an agreed number of days, or a day rate with a minimum commitment. The day rate for an experienced fractional executive is often similar to an interim rate, but the total cost is much lower than a permanent equivalent because the business pays for only part of the week. Some fractional arrangements in high-growth businesses include an equity or option element, which needs careful structuring alongside the IR35 assessment.

How to compare the true cost

A fair comparison sets each option against the same period, usually twelve months, and includes:

• Direct pay: salary and bonus, or day rate multiplied by expected days.
• Employment costs: employer National Insurance, pension, benefits and any apprenticeship levy share for a permanent hire.
• VAT, where it cannot be recovered.
• Recruitment or introduction fees for each model.
• Exit costs: notice, garden leave and settlement for a permanent hire, against a short notice clause for most interim and fractional contracts.
• Time to productivity, and the cost of the seat being empty while a permanent candidate works their notice.
• Insurance and indemnities, which are often overlooked in fractional and interim engagements. Our guide to insurance and liability for fractional leaders covers directors’ and officers’ cover and professional indemnity.

Done this way, the comparison usually shows that fractional is cheapest for a part-time workload, interim is cost-effective for a defined full-time need, and permanent is best value only when the business will use a full-time leader for several years.

IR35 and engagement structure

Most interim and fractional executives work through their own limited company, which brings the off-payroll working rules, commonly called IR35, into play. Getting this wrong can leave a business with an unexpected tax liability, so it belongs in the model decision rather than being left to the contract stage.

Who decides employment status

Since 6 April 2021, medium and large private-sector clients have been responsible for deciding whether the off-payroll rules apply to a contractor working through an intermediary, and for issuing a status determination statement with reasons. Where the engagement is inside the rules, the fee-payer (the client or an agency in the chain) must deduct income tax and National Insurance and pay employer National Insurance. Public-sector bodies have had this responsibility since 2017. HMRC’s guidance on off-payroll working for medium and large clients sets out the process.

Where the client is small, the contractor’s own company remains responsible for deciding status under the original IR35 rules. For financial years beginning on or after 6 April 2025, the company size thresholds were increased: a company is medium or large for these purposes if it exceeds two or more of a turnover of £15 million, a balance sheet total of £7.5 million and 50 employees, as explained in HMRC’s Employment Status Manual. Some businesses that previously had to make determinations are now small, and the reverse can apply as a business grows, so the position should be checked each year.

Factors that matter for senior engagements

Status turns on the reality of the working arrangement, not the contract alone. For senior executives the questions that usually carry weight are control over how the work is done, whether the client can require personal service or accept a substitute, the degree of integration into the organisation, financial risk, and whether the executive is in business on their own account with other clients. Fractional executives with several concurrent clients and clearly defined deliverables often present differently from an interim who sits full-time in an executive role for a long period. Holding a statutory directorship or an SMF function does not settle the question on its own, but it is relevant and should be considered with advice. Our guide to IR35 rules for senior executive engagements covers this in more depth.

Contract structures

• Direct limited company contract. The business contracts with the executive’s company. Common for fractional roles where the client is small.
• Agency or introduction arrangement. The executive is introduced and either contracts directly after introduction or through the recruiter, with the recruiter acting as fee-payer where the engagement is inside the rules.
• Fixed-term or part-time employment. Some businesses prefer to employ an interim on a fixed-term contract, or a fractional executive on a part-time employment contract. This removes the IR35 question but brings employment rights and costs.

Whichever structure is used, the contract should state the days committed, availability outside those days, deliverables, reporting lines, confidentiality, conflicts with other clients, notice, and the process for converting the role to permanent if that is a possibility.

Moving from fractional or interim to permanent

Many engagements are designed to change shape over time, and planning for that from the start avoids awkward negotiations later.

Fractional to permanent. As a business grows, the fractional executive’s days creep up until the role is effectively full-time. At that point the business can offer the individual a permanent role, recruit a full-time successor with the fractional executive helping to select and hand over, or keep the fractional executive in a senior advisory or non-executive capacity above a newly hired full-time lead. The right choice depends on whether the individual wants a single full-time employer, which many fractional executives deliberately do not.

Interim to permanent. Some interims are offered the permanent role after proving themselves. This can work well, but boards should test whether the skills that made the person effective in a crisis are the ones needed in a steady state, and should still benchmark against the external market.

Regulated roles. In an FCA-regulated firm, a change from fractional to full-time does not by itself require a new approval if the same person continues in the same function at the same firm, but the firm should update its records and responsibilities map. A new individual taking over will need their own approval, so the handover should be planned around the application timeline.

Conversion terms should be agreed at the outset, including any fee payable to the recruiter if a fractional or interim executive is taken on permanently, so that both sides know where they stand.

Common pitfalls in choosing the wrong model

Eight patterns recur.

Choosing fractional based on cost when the situation needs full-time. A fractional CFO is not a substitute for a full-time CFO when the business’s agenda requires daily senior attention. The cost saving disappears if the work does not get done.

Choosing interim when permanent is needed. Interim engagements end. If the business needs continuous leadership over several years, a series of interims produces gaps, repeated onboarding and a team that never settles.

Choosing permanent when the situation is genuinely transitional. Permanent appointments made for a time-bound situation often end uncomfortably when the person’s strengths no longer match the business’s needs.

Assuming regulated roles must be permanent. Many smaller firms overpay for a full-time SMF16 or SMF17 they do not need, or delay authorisation while searching for one, when an approved fractional holder with sufficient time would meet the requirement.

Overloaded fractional regulated roles. The opposite mistake: appointing a fractional compliance officer or MLRO who holds so many roles that they cannot respond when something goes wrong. Ask how many other firms the person serves and how cover works.

Mismatched expectations on time commitment. Fractional engagements need a clear definition of what two days a week actually means: which days, how responsive the executive will be between them, and what happens in a busy month.

Pay structures that do not fit the model. Applying permanent incentive structures to interim engagements, or interim economics to fractional ones, produces friction. Equity for a fractional executive, for example, needs to reflect a part-time contribution.

Leaving IR35 to the end. A late status determination can change the economics of an engagement after the candidate has been chosen, and occasionally loses the candidate altogether.

Managing the risks in each model

Each model carries its own risk, and most can be reduced with good preparation.

• Permanent: the main risk is a costly mis-hire. Reduce it with a clear brief, structured assessment, referencing and a planned onboarding period.
• Interim: the main risks are dependency and a lack of handover. Set objectives, milestones and exit criteria at the start, and make capability-building part of the role.
• Fractional: the main risks are availability and divided attention. Agree days, response times and cover, and review the arrangement at regular intervals against the business’s growth.
• All models: confirm insurance cover, conflicts of interest, confidentiality and, for regulated roles, the approval timetable and responsibilities before the person starts.

How Exec Capital approaches each model

Exec Capital runs engagements across all three models: permanent retained search for senior appointments, interim placements for transition and turnaround situations, and fractional engagements across the C-suite and regulated functions. Agreeing the right engagement model is part of the early work we do with every client, before a formal search begins, because it determines which candidate market we search and how we assess fit.

For regulated firms, our specialist team works regularly on fractional and interim SMF16, SMF17 and MLRO appointments, including combined roles, and on the timing of FCA applications. For unregulated businesses, the most common requests are fractional CFOs, COOs and commercial leaders for growing companies, and interim leaders for change programmes. Every search is run by our specialist team, with Adrian Lawrence FCA overseeing each mandate. To discuss which model fits your situation, see our fractional C-suite service or tell us about your hire.

Frequently asked questions

What is the difference between a fractional and an interim executive?

An interim executive is usually full-time for a defined period, often to cover a gap or deliver a specific change. A fractional executive works part-time on an ongoing basis, often for several businesses at once, without a fixed end date.

Can an SMF16 or SMF17 be fractional?

Yes. The FCA does not require senior managers to be full-time. The individual must be approved for the function at each firm, be fit and proper, and have enough time to perform the role effectively given the firm’s size, complexity and the person’s other commitments.

Can one person hold both SMF16 and SMF17?

In many smaller firms, yes, provided the individual has the experience and time to perform both functions properly. Larger firms, or those with higher financial crime risk, usually separate the roles.

Are fractional executives inside IR35?

It depends on the facts of each engagement. Medium and large clients must make a status determination; for small clients the contractor’s company decides. Several concurrent clients and defined deliverables can point outside the rules, but each case needs its own assessment.

When should a fractional role become permanent?

When the workload has grown to most of the week, the business needs daily leadership of a larger team, or the role has become central to investor or regulatory expectations. Agree a review point and conversion terms at the start.

Is interim more expensive than permanent?

Per day, usually yes. Over a defined assignment, often not, once employment costs, recruitment fees, notice periods and the cost of an empty seat are included. Compare all three models over the same period.

Further reading

For guidance on regulated part-time and interim roles, see SMF16 vs SMF17: when you need one, both or a combined role and interim SMF16 and SMF17 cover. For part-time operational leadership, see our part-time COO service.

For the move from part-time to full-time leadership, see replacing fractional executives with full-time hires and what is a fractional executive?. For our complete collection of senior hiring guides, see the Knowledge Centre.