Whether you’re a seasoned contractor or new to the game, negotiating rates is nearly never easy!
However, being aware of the steps you need to take before a new contract rate negotiation and at the extension renewal stage could be the difference between being satisfied or unimpressed by the rate you end up taking.
Many thanks to Nicholas Hopkins, Director & Head of Contract at VIQU IT Recruitment for this excellent advice.
Before a new contract
1. Bring up rates first
As the saying goes… the early bird catches the worm! I’d always suggest bringing up your rate at the beginning of a conversation with a recruiter or end client. There’s no point discussing the role in detail if their expectations are hundreds of pounds per day less than yours.
For example, the conversation might go something like:
RECRUITER: “I’ve got a technical project manager contract for 6 months on a remote basis to start immediately. Is that of interest?”
CONTRACTOR: “Potentially. My day rate is £400 per day. Does that align with what the end client is paying?”
2. Never use a rate range
It’s very easy to use a rate range or words like ‘usually’ or ‘I prefer’, but these innocent words give the recruiter signals that you might be willing to accept a lower rate.
For example,
CONTRACTOR: “My usual rate is between £400-500 per day.”
In this situation, the recruiter will automatically note down ‘£400 per day’ because that might make it easier to get the client to consider you and to get a deal done.
3. Don’t overtalk – there’s a power in silence
It can feel awkward, but you need to be blunt about your expectations and then stay silent.
There is a power in your silence, putting the expectation on the recruiter to make things work around the rate and hybrid/remote working arrangements you’ve stipulated.
4. Have a solid knowledge of the market
It is critical that you have done research into your market to understand the current average rates. This way recruiters cannot blind you with knowledge and make you question your rate expectations. You need to be confident that your rate is fair based on your skills, experience level and current market conditions.
5. Research who pays well for your skills
Part of your research should be into local and national companies (if you’re looking for hybrid/remote) that regularly hire people with your skillset. This is particularly important if you have a very niche set of skills or sector experience.
Tapping into your network of peers and old connections is a fantastic way to do this! But also utilising the knowledge of recruiters that you’ve built good long-term working relationships with.
You should be looking to work with recruiters who regularly advertise roles in your sector at fair rates.
6. Make smart market-based decisions
Use your research to make decisions on whether short or long-term contracts are best to take in the current market. For instance, if the market is thriving and you’re not struggling to find work, only sign a six month contract with the notion that they will want to retain you, so you can renegotiate for a higher rate in months 6-12. Whereas, if the market isn’t great and there are lots of contractors actively on the market, you might want to take the security of a longer contract.
At contract renewal time
Long before you’re thinking about your contract end date coming up and the possibility of an extension, you should have been doing the groundwork. By this, I mean you should have been consistently highlighting the expertise you have brought to the contract and the direct results.
If you just want to keep your head down and get the job done, it can be easy to fade into the background, when in fact, you are doing solid work that is having a big impact. This is often the case for contractors working remotely / on a hybrid basis.
By sending a weekly email to your manager that highlights your good work, your successes and your wins, you’re already setting the right foundations for securing a contract extension.
1. Always push for a rate increase
No matter what the circumstances or things you’ve heard, you must go to your recruiter and make clear that you would accept an extension on the basis of a rate increase.
It would take time and money to replace you, and the recruiter won’t want to lose you off their contractor book and run the risk of the client using an alternative recruitment agency.
This can work in your favour, so let the recruiter know where your head is at early on.
2. Act as a commodity
By working for the end client for a number of months or years, you have become a commodity. You’re someone who understands the intricacies of the business and who has vital skills they need to retain.
You’re a known entity, and you can use that to your advantage in a negotiation.
3. Have lots of irons in the fire
There is never a guarantee of a rate increase or even an extension until everything is signed and sealed. Therefore, in the 6 weeks before your contract is due to come to an end, you should be actively looking for other opportunities.
By doing this, you could use other potential opportunities as leverage to encourage the end client to issue the extension and increase your rate.
Remember your manners
1. Be friendly
Don’t treat your recruiter like the enemy. Some contractors get nervous about negotiating and end up taking it out on the recruiter. So don’t forget that your recruiter is a human too. They negotiate for a living and will benefit from you getting a higher rate.
Keep calm, be nice and think before you act.
2. Don’t bring up the recruiter’s margin
If a negotiation isn’t going well, it can be tempting to bring up the recruiter’s margin as the thing that could be reduced to increase the day rate. This is insulting to the recruiter.
As a contractor, you might not be aware of the extensive time and effort that has gone into growing and maintaining the relationship with the client. So separate them out, and only think about your own worth and day rate.
3. And finally…
If things don’t go the way you wanted, or you get a contract/extension but it’s not at the rate you wanted, don’t badmouth the client or the recruiter.
Both parties will appreciate discretion and tactfulness. Running your mouth will make you appear sloppy, silly and will likely negatively impact your reputation in the market.
To conclude, you might not like rate negotiations but they’re a key part of being a successful IT contractor.
Do your research, know your worth and be friendly. Try to work with your recruitment agency (not against them!) and hopefully you can achieve an outcome that works nicely for everybody!
