If you’re about to start a new contract, or if you’re coming up for renewal, these tips may come in handy to help you maximise your earning potential, whilst keeping on the right side of your agent and prospective client.
1. Contract rates are subject to supply and demand movements, influenced by a number of factors, including the state of the economy as a whole, and the relative scarcity of any given IT skill.
2. Personal factors will affect the rate you can command, including your own skill set, the depth of your IT knowledge, and how much industry experience you have had.
3. Rates vary by region, with the highest rates in Greater London (including the City), the South East and South West. Around 80% of all contract vacancies are in the South of the country.
4. Rates vary within industry sectors, with some of the highest rates of pay in the financial services and oil sectors (although the outlook for the latter is not particularly rosy).
5. If the economy is looking strong, and you have a number of contract offers available to you, your bargaining power is stronger. You can afford to say ‘no’ to less than optimum roles, or push for a higher rate.
6. Strong negotiation skills are not natural to many of us. It can seem a little unnatural when you first start contracting to fight your corner, however rate negotiation is a business activity and not a personal one.
7. Opportunity cost – during your career as a contractor, you may be faced with the prospect of taking a low paying contract right away or holding out for a better prospect (which may or not materialise).
8. Don’t be afraid of asking your recruitment agent how much commission they are expecting to make on your contract. There may be room for movement, in your favour, if you negotiate strongly, and if the agent’s commission is a little on the generous side.
9. When applying for a contract role, avoid mentioning your current rate as this may limit your negotiation options later on.
10. One of the golden rules of negotiation is to aim high and expect to compromise to achieve the rate you really want.
11. If you are negotiating a rate extension, the rules are different, as you will already have a relationship with the client, and presuming they are happy with your work, they will be keen to keep you onboard rather than starting again with a new face.
12. Don’t be afraid to discuss your renewal options with the person on the client site who pulls the strings, as well as your agent (if you are using one).
13. Don’t threaten to walk away unless you are in a strong position, as the agent/client might just call your bluff. It is a delicate balancing act.
14. Try to act cool when negotiating, even if you are new to contracting. If you appear to lack conviction in your own worth or confidence in your rate demands, the agent may see through this.
15. Don’t let things get personal. You are running your own business, and your aim is to maximise the returns you can achieve in return for providing skills to the end client.
16. You must be prepared to compromise and show that you are flexible; even more so when competition for contracts is fierce.
17. There are times when it is simply not in your best interests to push for a rate increase at all, for example when the economy is weak, or clients in similar companies are cutting contract rates (this frequently happens during lean times in the banking sector).
18. Recruitment agents are professional negotiators. Although you may form good relationships with agents along the way, their two main aims are a) to maximise their commissions, and b) to keep their clients happy.
19. Ultimately, the whole negotiation process is a type of game. You want to maximise your rate, the agency needs to make money and maintain their client base, the client wants to minimise his outlay whilst getting the best contractor available to them at the current rate.
20. Don’t feel bad if your negotiation tactics fail at any stage. Over time, you will become wiser to the ‘tricks of the trade’, and your business skills will improve with experience. Ask any contractor, and chances are, they’ll have a story to tell about the time when they were fleeced by some wicked recruiter or another.