Average contractor rate rise and how often?

[northernladuk]

I'm coming up to my second annual renewal and will be asking for the agent for a daily rate increase.
Just curious what peoples experience's doing this are. Ask for 5% ? 10? a specific daily rate? At every renewal?

Why do you think you deserve a rate rise? What are the factors that are pushing this? Do you not think that is a very perm way of thinking? Are you inside or outside?

In my case I started off at a decent rate... not top top end but decent. I am sole BA for new mission critical systems/web services, both internal and external, for a large international sporting organisation. Client is more than happy and working relationships are very good....

So you are delivering what you are being paid for and all is happy... OK... Not the best basis for a hard nosed negotiation.

....So I was planning on asking for an inflation matching increase of 7% (same/similar to the past 2 years inflation), although of course strictly speaking, if that is what I wanted to achieve, then asking for 10% with the inevitable negotiation down by the agent might yield the best outcome....

Inflation isn't really a good enough excuse to increase a b2b rate. Even employees don't get inflation matching pay rises so why should you? I'd say it's much more common for a client to expect a rate reduction at renewal, many contracts have it written in. Public sector engagement documentation usually mandates a 10% year on year reduction to take in to account the supplier has now bedded in and can work more efficiently.

...Although asking for 10% seems to be pushing it bit, I am guessing the agent might ask the client for a bit less and maybe then also take a fraction out of their, probably significant cut, but at the same time I run the risk of the agent asking the client for full 10% which might raise the client's eyebrows!

I don't think you understand what you are, what you do, where you sit in the chain, what the agent does and the relationship between the client and the agent.

Don't get me wrong at times nothing wrong with asking for a rate rise for one reason or another but expecting one after the first year based solely on inflation is a very perm way of thinking. There are two ways you'll get a rise. The client ups what they pay to the agent - next to impossible as they'll have a rate card and will not be able to change it, and the agent gives you a few 10s of pounds out of their commission as they've paid off the upfront effort so working more efficiently. Problem with this is what model is the agent getting commission on. If it's a fixed rate they'll be making a couple of percent from the client and there is no float. If it's not the agent could be taking anything from 10% upwards and they might have fleeced you if you didn't negotiate hard enough. The most common way you get a raise is if you were fleeced from the outset. You need to understand all of the above so you know what is possible. Just going in meekly asking for a rise is not going to work. They say no, you say oh well and on you go. The agents are very good at this. If they have absolutely nothing to lose, which they don't, then you don't have a leg to stand on.

So I'd say you need to up your game first. Take time to understand what you do, the situation, the client/agent relationship and understand where you are going to target your raise request. Then you go in there with a give me it or I'm off offer and be prepared to stand your ground. If you aren't going to walk then you've no bargaining power. Agents deal with this with every single contractor every single year. They are experts. They know when you are bluffing and will just kick back to see what you will do and in 99.9999999% of time you'll go away with your tail between your legs.

All the above said, if you are on a good rate, everyone is happy then just don't bother rocking the boat. Positive side is nothing will happen, downside is you've made yourself look like a problem and any chance of getting a rate rise a few years down when you can justify it has just evaporated.

[hgllgh]

ok... see what you're saying NorthernLad ... although this is my second annual renewal coming up not the first as you were saying. I would say that contractors as businesses are just as entitled to negotiate rates as any other business is, or as any employee is to negotiate salary. So it doesn't necessarily mean that contractors are more like an employee if they do this. All businesses are subject to inflation, rising costs/taxes etc etc, with contracting businesses certainly no exception on that front, so not pro-actively upping rates each year means an effectively guaranteed cut in income/spending power on a flat unchanging rate.... but... on balance... based on what you're saying (and others on the thread), and in the current market, as the rate is still ok... I might just keep my head down on this one and reconsider if I make it to a 3rd renewal (its a big project... and I'm outside btw)

[Snooky]

The grounds for a rate increase in my view are fairly sparse:

1. You can get more money elsewhere to do the same role and you're prepared to have your bluff called and walk if necessary
2. You can demonstrate quite clearly that you provide a lot more value than the rate they're paying might demand and they rely on that extra value, so they'd have to pay more to replace you with someone who could match it

Clients as a corporate entity couldn't care less about how inflation affects you or what your costs are. Their equation is very simple: what do we absolutely need to get done and what's the least we can get away with paying for it? Just like any other service.

In the current market I'd be surprised if (1) was true, unless you're being quite underpaid at the moment.
(2) is a far weaker point to make your stand from and, if the client knows the market is bad, they can continue to take advantage of the situation anyway.

I wish you well, and there's no harm in asking, but be prepared to present a very compelling case or - as others have said - keep your head down for the time being and be thankful you're still bringing in the cash!

[northernladuk]

ok... see what you're saying NorthernLad ... although this is my second annual renewal coming up not the first as you were saying.

Doesn't make much difference.

I would say that contractors as businesses are just as entitled to negotiate rates as any other business is, or as any employee is to negotiate salary. So it doesn't necessarily mean that contractors are more like an employee if they do this.

It's your approach looking at a small percent increase with inflation as your justification. That's not how business approach it. It looks very permie'esque the way you are speaking. I mean, the title alone. Average contractor rate rise. There simply isn't such a thing. Needs a different way of thinking as to how you approach it, justify it and then deliver it. It's just how the whole post comes over, or could just be me reading that in to it.

All businesses are subject to inflation, rising costs/taxes etc etc, with contracting businesses certainly no exception on that front, so not pro-actively upping rates each year means an effectively guaranteed cut in income/spending power on a flat unchanging rate.... but... on balance... based on what you're saying (and others on the thread), and in the current market, as the rate is still ok... I might just keep my head down on this one and reconsider if I make it to a 3rd renewal (its a big project... and I'm outside btw)

How is your business affected by inflation? You need another 7% because your general costs have gone up? The cut income affects absolutely everyone, business, employees, self-employed, un employed the lot but again, no one else gets 7% on top year on year. Would you be happy if your client cut your rate by 7% to cover their losses? Be happy if your accountant put their rates up every year and so on? It's a negotiation and you have to factor the outcomes. Will a client want a supplier that's expects a rise every year? No they won't. Occassionaly, if something has changed a re-negotiation is required but it will come with a compelling argument. More often than not the suppliers will look at cost cutting to offset that. Have you done any of that? As I also said, clients are looking for discounts, not suppliers that push them every year. You provide a service, your costs haven't gone up so why should you get a rise?

As others have mentioned, head down time, even more so if you've got an outside contract. You should be laughing every evening your down tools. 80% (or whatever) of contractors are now inside and would kill for your gig, and you can bet your bottom dollar your client manager is getting people wanting your role on a weekly basis. Don't give them anything that might upset a very cushty gig.

If it's still on your mind then your first job is to find out what commission model your agent is on. A smart contractor would have found that out very early on. Ask every agent if they are on fixed commission. If they are then nothing you can do. Client isn't going to up your rate card (remember the costs are biting them a lot harder than they are biting you!). Agents don't tend to hide the fact they are fixed commission so you don't need to be too concerned as to whether they are lying or not. If they don't give you a straight answer then they could be on whatever they've negotiated off you. You could do with finding out what that the client is paying the agent. In the old days you'd usually find the list left on a printer at some point during the gig. Hell, it wasn't uncommon for the agent to accidently mail it to all contractors but nowadays it's about rummaging around sharepoint and knowing where to look. It's usually there somewhere.

Get all that info and then you've got a picture of what you can and can't do.

[ladymuck]

The only time I've bothered requesting a rate change would be in the case that I've accepted a change of scope to that originally agreed. I might make that request at renewal time or at the time the scope is changed, depending on the nature of the change, how long I've been there, relationship withe client, etc etc.

Otherwise, you're essentially saying that you no longer want to honour the price you originally agreed for the job.

In future, if you want to get a rate increase on extensions then perhaps look at rental increase clauses in tenancy agreements and see if you can get a similarly worded clause added to your next contract. (Never tried it myself)

[Ketto]

I’d always suggest not over thinking it and just quoting what your rate is for an extension and either being prepared to walk if they say no, or back down with minimal fuss if you’re not. Bear in mind also that the market is very bad at the moment and may be for some time.

In my experience the mindset you have before starting this conversation seems to directly impact the outcome, if I’m prepared to walk i’ve nearly always had the increase accepted, if i subconsciously know i’ll back down then more often than not it isn’t. I must give off half arsed vibes if i’m not serious.

Current client just asked me to quote for a new project starting in the new year and i just bumped the rate up by 5% in the document, it was accepted and nobody batted an eye lid.

[unixman]

Your rate is good, they are about to renew the contract - all is good with the world.

Pay increases are part of employment, for obvious reasons. They aren't appropriate for shortish contracts. If you could earn more elsewhere, good. Complete your contract as-is, and look forward to a higher paid role thereafter.

Having been there 2 years, you have endured some pretty stiff inflation on that rate. But so has everybody else. Your question is perhaps understandable, but in my view, keep everything sweet and keep tootling along.

[TheDude]

Rate rise - that's classic.

In this market it might be an idea to keep your mouth shut rather than discovering you are not as indispensable as you think you are.

[dsc]

The only time I've bothered requesting a rate change would be in the case that I've accepted a change of scope to that originally agreed. I might make that request at renewal time or at the time the scope is changed, depending on the nature of the change, how long I've been there, relationship withe client, etc etc. [...]

^^^ this, in theory you shouldn't even be overdelivering as your scope is set before you start a contract, so you basically know what you are taking on and you give them a rate for that scope of work. Scope changes - re-assess and rate change if needed, when some funky skills are required etc. Rate change over time is normally seen in services which last a long period, something you shouldn't really be doing as a contractor anyway (unless it's one of your multiple clients and you are doing support or something similar for a long period).

And before you ask, try to check with people how likely it is to be told yes, of course this depends on the relationship with the client, but in most cases you do know how well you are doing the job and whether you stick as a sore thumb in terms of cost. In the current job market, I'd be happy if I had a renewal let alone try to push the client to pay more, but that's just me of course.

[edison]

I've had a dozen gigs over the years and chanced my arm once at renewal time and got a 5% rate rise.

It wasn't much but I had a feeling the agent was already taking a decent cut and neither they or the client batted an eyelid. Today's market is very different, you'd have to be brave/confident to ask for a rise now mid-assignment.