Ever wondered who sets the rates for contract roles, how to get a prospective client to increase what they’re willing to pay, or how to squeeze an agent’s commission in your favour?
We asked Simon Bichara to answer these, and other questions, from a hiring manager’s point of view.
In general terms, what should contractors do to ensure they can maximise their earning potential?
Firstly contracting is a market, so supply and demand applies. So, the first thing to do is to make sure you’re contracting in a sector where demand outstrips supply. For example – at present in financial services there is huge demand for regulatory skills which outstrips the supply of appropriate personnel. If you haven’t got those skills then you can get them through training, or through offering to work on an junior role for a reduced rate for a while in order to gain experience.
The second thing is to ensure that you’re developing deep skills – typically those with more skills and experience will be more valuable (and thus better paid) than journeymen. Everyone likes to big up their job titles, so this has become pretty meaningless – what really matters is the job you’re capable of doing not how it’s labelled. Of course it’s also important to evidence these skills – every other contractor applying for the role will also be trying to sell themselves, so if you are the standout candidate independent evidence of your strengths will help you land the role.
Who sets the rates advertised on job boards? Are clients advised by their recruiters / agents?
Typically it’s a combination of the client and the agent. Most experienced hiring managers will know the market well and where they need to pitch the money to get the right skills – others will less experience will rely more on advice from their recruiters. The prices you see advertised will, of course, actually be placed by the recruiters – and not all firms are scrupulous about this. Some will inflate the rate in order to get more applications, and hope that they can persuade the client to pay; others will be more realistic. Treat all the data you see in adverts with a large pinch of salt – only data on actually achieved rates is really worthwhile.
As a hiring manager I’ve yet to see a source of this data which matches my experience of hiring.
Typically, will clients agree to a higher contract rate if an applicant has the right skills?
It depends. Sometimes the job only needs a certain skill level, and having more than this just helps you be ahead of the pack in landing it. In this case you’re unlikely to be able to push the rate up. In others the skill level of the worker can be decisive, and in these cases the client should be willing to pay more – this is one of the reasons that it’s worth asking searching questions about the role to understand not only what it is, but how it fits into the company.
Remember that in any large company you’ll need not only to persuade the immediate hiring manager, but also to give them the evidence to persuade their boss and their HR department to make an exception for you – again, hard evidence is important here. Word of mouth is unlikely to be enough.
If not, how likely will a recruiter cut his/her commission in favour of the contractor? (or is this more of a myth?)
It depends on the sector and the end company. You’re much less likely to see this with a large company in financial services, for example, because they will have an effective procurement department who will have squeezed the agent’s margin down to the bone already. A small company in healthcare, by contrast, might still be paying a 20 or 25% margin – giving a lot of scope for the agent to shave their margin to get a contractor the role.
You should know what margin your agent is taking. It’s fair that they take some (they have to eat too) – but make sure it’s not too much.
If you found this article useful, try another set of questions answered by Simon here – what recruiters really want to see on a contractor’s CV.