When Contractor Rates are market driven be sure to negotiate a better rate when demand in your niche market is high. However, ensure that you communicate with your clients and build a good relationship with them to facilitate future negotiations. The same principle applies if you work through an Agent.
How to Negotiate Better Rates
Tip 1 – Research the market rate for your niche Industry by comparing the market rate to the rate that you would normally charge or that your agency pays you.
Tip 2 – Negotiate your contractor rates using facts from your market research.
Tip 3 – Communicate with your client or agent openly and clearly by being prepared. Showcase other projects you have completed to reflect your skills, quality of work and experience.
Tip 4 – Keep up-to-date by monitoring online job boards, contractor publications and recruitment company salary surveys.
Acquiring Rate Increases
To acquire a rate increase will depend on how you approach your client or agency. Always request this in writing using a professional tone via email. It should be well structured and include an introduction and a summary. Throughout the email you should ensure that you justify your request for a rate increase. Also mention that you are happy with the working environment and the team of staff that you work with. Suggest a review date where this can be discussed with your client in person.
Factors that Secure Rate Increases
The key factors that secure rate increases by contractors are as follows:
- Maintain a solid relationship with all the client’s employees
- Be professional
- Ensure job completion at agreed date
- Demonstrate expertise in your field
These all contribute to making your client open to a rate increase as they value your contribution and see you as a member of their team that they can depend on.
How to Maximise Your Earnings
To maximise your earnings you should ensure that you do not have gaps between contracts. A good policy to follow is to negotiate a high rate as possible that reflects both the scope of the project and your unique experience and expertise. Also ensure that any change in the scope of the project which increases your responsibilities can warrant an increase in the rate your request.
Operating through an Agency
Operating through an Agency is a good idea and can provide various benefits to contractors. Agencies are up-to-date with current market trends and should negotiate the best rate for you. They will also ensure that you have few gaps between contracts by constantly finding new contracts for you. It is important to be aware that the typical mark-up on your rate by agencies usually starts from 12% but can be as high as 20%.
Always Retain Professionalism
To secure a successful rate increase by negotiating often depends on your professionalism and reputation. Both are valuable assets and need to be maintained to ensure solid relationships are built. The most important relationships to maintain are with your contract team which include your manager, your agency and your client. Your professionalism in the workplace will ensure that your reputation remains intact. When seeking new contracts, clients and mangers will be willing to hire you again and renew your contract if the relationship you had with them was professional.
Tax Efficiency using a Limited Company
Taking home as much pay as possible is a must for a contractor’s success. A good option is running your contractor business through a Limited Company. This business structure is the most tax efficient option open to contractors. At Fusion Accountants, our team of Expert Accountants can discuss how to open a Limited Company and be tax efficient to ensure that you maximise your earnings.
Shoaib Aslam is the co-founder of Pearl Chartered Accountants, a UK-based chartered accountancy firm that has multiple locations across London. They are experts in helping startups and established businesses with all aspects of growth, strategy, scaling up, accounting and tax planning.