Will contract rates increase to pass dividend tax increase to clients?

[LondonManc]

RBS, Deutsche, HSBC, Barclays all doing it ...

What the fluffing hell am I doing down here then. Meh.

[northernladuk]

Not wanting to ruin your world view, but the cost of outsourcing is going up very significantly. The figures I'm seeing suggest they are only just half the cost of local resource now, but the upward trend is quite strong. The day of them being the 20th of the cost of a local resource are long gone. Many businesses are beginning to look at bringing the more high value work back onshore.

Doesn't ruin my world view. Just another set of factors from a different source all affecting what we do. I was just mentioned the fundamental shift from what used to be a specialised method of engagement to the standard where clients go straight for a contractor and anyone with anything over 2 years experience thinks they can be a contractor. It's being diluted at pace so still some time before it level off but no doubt the Gov will drop a bomb on it before that happens for exactly the reasons I've just mentioned.

[LondonManc]

Not wanting to ruin your world view, but the cost of outsourcing is going up very significantly. The figures I'm seeing suggest they are only just half the cost of local resource now, but the upward trend is quite strong. The day of them being the 20th of the cost of a local resource are long gone. Many businesses are beginning to look at bringing the more high value work back onshore.

When you factor in that you could get a Manchester-based resource for £300-£350/day rather than a London-based one for £500-£600/day, numbers can be adjusted very favourably in keeping contractors local; factor in a single department to manage London and Manchester contracts with them being in the same country, no time window to do calls in, no language barriers (apart from this lot down here tawking fanny init gavner) then a "north-shoring" policy would work wonders. USA firms often run their back-office operations in a US city where day rates are lower; for me, it's a model that would work well over here too.

[WordIsBond]

Which you're perfectly entitled to do. My point is that justifying this to a client by saying that your *personal* tax liabilities have increased isn't going to get you anywhere. Then there's still the risk they just say, thanks but no thanks, and find someone cheaper.

True. But all it takes is a few contractors to decide it isn't worth it anymore, a few who are in a good position to put up their rates (they don't have to give a reason, they just have to say what their rates are), and the inevitability of supply and demand kicks in, dragging rates up at least marginally.

I'm not telling my clients, "Oh, my rates are going up because the Chancer hit me with a dividend tax." They'd laugh. I'm just saying, "I'm increasing my rates by 4%, effective April, cost of doing business has increased." If someone pushes back, I'll happily settle on 3% and grudgingly go to 2%. If they can't handle any increase, someone else will. Next year (depending on what happens) or the year after, I'll increase again.

Too many contractors have the permie mindset that the boss sets the salary. You run a business and you set the rate at which you will provide its services. If you increase your rates by 3%, and they are happy with the quality of the service you've provided, few clients are going to say, "Oh, let's take a chance on some other guy who is 3% cheaper."

If they find a way to force me into IR35, then I'll be passing through a bigger increase and saying why -- this idiot government is making a mess of my kind of business and I can't provide the service I've been providing at the price I provided it in the past. If you don't like that, maybe you should take it up with the government.

[Willapp]

OK

'I am a business and decided to put my rate up by 8%.'

Happier now ?

Which you're perfectly entitled to do. My point is that justifying this to a client by saying that your *personal* tax liabilities have increased isn't going to get you anywhere. Then there's still the risk they just say, thanks but no thanks, and find someone cheaper.

[Bluenose]

OK

'I am a business and decided to put my rate up by 8%.'

Happier now ?

[northernladuk]

Yes but we aren't talking about individuals are we, we are talking about an entire industry being hit with the same tax increases.

I would expect that most would seek to pass those costs onto their clients which in the medium to long term should see rates rise to compensate.

Industry isn't being hit. The people are. This is a personal tax...

And it's not an industry, it's anyone that has enough shares....

And What Willapp Said.

[dogzilla]

Yes but we aren't talking about individuals are we, we are talking about an entire industry being hit with the same tax increases.

I would expect that most would seek to pass those costs onto their clients which in the medium to long term should see rates rise to compensate.

[Willapp]

Must admit I haven't read all the previous posts, but I don't see how anyone can think that clients will just bend over and take a rate increase for something that really isn't any of their business. What our overheads are as contractors is irrelevant to the client - it's no different to if PI/PL insurance rates suddenly increased, you wouldn't expect to just be able to pass this onto a client or certainly not by saying "well my insurance has gone up so up goes my rate".

Bottom line is that rates are set by supply and demand across the market, so of course you can pitch for higher rates but as soon as they find someone with broadly similar skills who's willing to work for less, your reasons for wanting a rate increase won't mean squat, they'll just go elsewhere.

The only reason I would approach my client about a rate increase is if I've been with them for say 12 months or more and could demonstrate that my value to their business has increased and they've seen that I deliver a high quality of work.

[WordIsBond]

Back to the original question, I just agreed a two month extension, 60-80 hours a month, with a 4% increase. Not sure yet how my others will go, or even if they'll be extended at all.

Someone once said, "Ye have not because ye ask not."