Reply to: Contract rate cuts

[swamp]

My view is this - I totally object to cuts mid-contract but would be happy to re-negotiate for any renewal offered. This seems fair.
If ordered to cut rate mid term, I would more than likely accept this to keep the revenue coming in. I realise this inertia is what enables companies to do this, if everyone walked they wouldn't dare but I am worried only about me.
Once I had been turned over, I would be looking for another contract and while I would still maintain standards for the existing contract, I would NOT be pulling out all the stops, accepting calls outside of work etc and I would have no qualms walking off if I got a better offer. If this is worth a 10% saving to them - fine.

^^^ this.

I suspect that companies who have mid-term cuts, and particularly repeated cuts, will find they will tend to lose the best contractors.

It's a bit like in permie-land when companies offer voluntary redundancy. It's a well known problem that only the best and most valuable employees take up the offer, because they can get jobs elsewhere.


Oh, and there is also a Prisoners' Dilemma going on here, for those who like to mull over such things.

[lukemg]

My view is this - I totally object to cuts mid-contract but would be happy to re-negotiate for any renewal offered. This seems fair.
If ordered to cut rate mid term, I would more than likely accept this to keep the revenue coming in. I realise this inertia is what enables companies to do this, if everyone walked they wouldn't dare but I am worried only about me.
Once I had been turned over, I would be looking for another contract and while I would still maintain standards for the existing contract, I would NOT be pulling out all the stops, accepting calls outside of work etc and I would have no qualms walking off if I got a better offer. If this is worth a 10% saving to them - fine.

[swamp]

Because you set your own rate!

I'm not trying to come across like gods gift to contracting. It's just how I approached it from day one. The rate is X and I'll adjust that up and down based on what the market tells me - not one client.

It's true you set your own rate. I set my rate to maximise the return to my shareholders, and in most cases two months on the bench will be much more expensive than accepting a 10% rate cut on a six month contract (say).

Around 2008/2009 rate cuts were commonplace, and not many big contractor sites escaped. Some were mid-contract cuts across the board, and other places cut rates at renewal time. One place I was at asked contractors to re-tender for their roles -- you could pitch any price you liked, but the 'expectation' was that you pitched lower. Most did (though some were on stellar rates!)

Another ugly thing that started to happen in many places was the 'early termination'. I saw one contractor terminated immediately after he was given a 12 month extension because he wasn't needed on the project.

Some of this is good for the contractor 'market'; we should be a flexible resource. But before '08/'09 such behaviour was rarely heard of, and one always felt there was a gentleman's agreement that contracts would be fulfilled by both parties. It was bad form to leave a contract early. That has changed now and it's almost considered normal business practice now to invoke the termination clause as required.

[Kanye]

Why? It's just a phrase. It means "they are cutting my rate".

Because you set your own rate!

I'm not trying to come across like gods gift to contracting. It's just how I approached it from day one. The rate is X and I'll adjust that up and down based on what the market tells me - not one client.

[Kanye]

Funny thing is about your first comment Kanye is that you are the only one that has mentioned the word permie in this entire thread... not once but three times and have even compared a permies career and pay structure in this discussion.

I must say you have quite an aggressive posting style.

I'm not comparing the pay scales of contractors or permies.

I simply illustrated my point that the natural order of things is for your value to an organisation increase over time, pointing towards my own permie experience due to relatively limited time in contracting world.

I personally have never heard of rate cuts, and without ego, wouldn't entertain the idea of a rate cut based on above point. The price is the price is the price. If I consistently lost contracts based on price I would re-evaluate, but no way in response to one client request.

It's just an opinion, and one semi backed up by the poster above. Get over yourself.

Back to lurking for me.







()

[swamp]

My broader point was that 'they're cutting my rates' is a permie / employee / victim mentality.

Why? It's just a phrase. It means "they are cutting my rate".

[northernladuk]

Must be a UK phenomen, phonemon...bugger it...thing

Having lurked around these forums for a number of years, I'm always surprised at the extent that people see and treat contracting like being a permie.

I can also point to a 7 or 8 year permie career that had lots of pay rises and not a single step backwards.

Funny thing is about your first comment Kanye is that you are the only one that has mentioned the word permie in this entire thread... not once but three times and have even compared a permies career and pay structure in this discussion.
A) Why did you compare permie payscales? They have absolutely nothing, zip, nadda, zilch to do with this thread
B) The fact you consider permie renumeration and contractor invoicing/billing even slightly comparable shows you are more guilty of your own first comment then anyone else I have seen on the forum for a long time.

I am sure I could have used the word 'irony' in here somewhere but I am too stupid to use it correctly.

Sorry...

[darmstadt]

In, however many years I've been contracting, I have never had a rate cut and I do have to say, I've never met anyway who has had one. Admittedly I used to price myself quite competively at first which might explain that but the past few years I've been putting up my rates and apart from UK agencies I've never had a problem with them and now tend to get rate increases. Must be a UK phenomen, phonemon...bugger it...thing

[Fred Bloggs]

Cutting of contractor rates reached epidemic proportions in Q4 2008 to Q2 2010 in my business area. Once one client co started, they all seemed to follow suit. I was at one of the few co's that didn't cut rates by between 10 and 25%. Lucky for me, my client co's attitude was that their if end client hadn't cut hourly charge out rates, then they wouldn't reduce contractor hourly rates. Not many firms had that attitude, most firms took advantage of the situation to widen their margin and cut contractor hourly rates.

[Kanye]

It has been pointed it out it does happen alot and the word inevitable indicates at some point in your career you will face a cut which I think is quite a reasonable assumption.

...

I have to say I am surprised that you don't know anyone that hasn't had a rate cut. I really am. There has to be another reason for this.. You have never asked, people don't like to talk rates etc etc... times are hard and we are a soft target so would have thought many of us would have felt the pinch at some point.

I still think 'inevitable' is overdoing it.

I've acknowledged that it does happen so it's probably not worth arguing over the degree, but in all of my contracts, the customer has worked hard to find and secure good contractors and it has felt as though rate rises were more on the cards than rate cuts.

Granted I have only been contracting for around 18 months, but this has been through the recession.

I can also point to a 7 or 8 year permie career that had lots of pay rises and not a single step backwards.

Remember, the natural order is for value to increase as time goes by.

We all say we would walk on principle but oddly enough principles don't pay the bills. I would rather sit with a nice piece of humble pie (all be it 10% smaller) than sitting in the rain going hungry. Most of us have done the big talk approaching a cut but very few (if anyone) put themselves out of a job just on that.

My broader point was that 'they're cutting my rates' is a permie / employee / victim mentality.

I assume you weren't being literal, but worrying about bills and going hungry obviously does reduce your choices. Some of us can obviously afford to be more principled over rates than others e.g. due to a big war chest.

All things being equal, I would rather have a month or two on the bench and then 'catch up' on my years earnings rather than take a 10% cut. Obviously other factors may play into that decision.

The way I look at it.... if your current client is the only one in the country willing to pay your desired rate, you don't have a sustainable business in the first place and therefore need to re-consider your rates anyway.

[northernladuk]

You lot are a tough bunch!

It's not that commonplace - I know a lot of contractors and don't know of anybody who has ever been asked to take a pay cut.

It does of course happen from time to time as experienced by posters here, but I don't think it can be described as 'inevitable' or 'commonplace'. Especially not on contracts of < 6 months.

Budgets are normally agreed a year or two in advance so maybe more likely on multi year projects.

I would probably walk on principle if asked to take a rate cut, though it is of course completeley fair game for the buyer to do this between contracts. Just as we, as the supplier, are able to ask to raise rates at renewal times.

Having lurked around these forums for a number of years, I'm always surprised at the extent that people see and treat contracting like being a permie. If you don't like the price they are prepared to pay then go and find another job!

I am afraid you are the only person that has mentioned the word commonplace. It has been pointed it out it does happen alot and the word inevitable indicates at some point in your career you will face a cut which I think is quite a reasonable assumption.

Costs may be agreed but budgets are not given two years in advance. Budget is allocated and reassed at regular intervals and also on an ad-hoc basis if need be. Budgets often get pulled for no reason. If a project is failing it can be canned there and then and budget closed.

We all say we would walk on principle but oddly enough principles don't pay the bills. I would rather sit with a nice piece of humble pie (all be it 10% smaller) than sitting in the rain going hungry. Most of us have done the big talk approaching a cut but very few (if anyone) put themselves out of a job just on that.

I have to say I am surprised that you don't know anyone that hasn't had a rate cut. I really am. There has to be another reason for this.. You have never asked, people don't like to talk rates etc etc... times are hard and we are a soft target so would have thought many of us would have felt the pinch at some point.

[northernladuk]

really (only ever made one post)? sounds more like some HR k nob trying to find out if they can get away with cutting rates

I see where you are coming from on this. I see it as someone with a pretty poor grasp of the English language and contracting in the UK. The reasoning behind the question escapes me though but there you go.

[Kanye]

You lot are a tough bunch!

It's not that commonplace - I know a lot of contractors and don't know of anybody who has ever been asked to take a pay cut.

It does of course happen from time to time as experienced by posters here, but I don't think it can be described as 'inevitable' or 'commonplace'. Especially not on contracts of < 6 months.

Budgets are normally agreed a year or two in advance so maybe more likely on multi year projects.

I would probably walk on principle if asked to take a rate cut, though it is of course completeley fair game for the buyer to do this between contracts. Just as we, as the supplier, are able to ask to raise rates at renewal times.

Having lurked around these forums for a number of years, I'm always surprised at the extent that people see and treat contracting like being a permie. If you don't like the price they are prepared to pay then go and find another job!

[mrdonuts]

He is the contractor not the company..

really (only ever made one post)? sounds more like some HR k nob trying to find out if they can get away with cutting rates

[ChimpMaster]

Oh bugger... well it was a crap ironic post instead of a crap advice post then...

Rate cuts are almost inevitable in an economic climate such as that we've had for the past 2 uears.

Some on here have had multiple rate cuts reducing their company income by some 40% (was it Voda?).

If you're looking to contract I would not do it in the UK right now... but that's another story.