Reply to: Renewal of Contract and negotiating rates

[quackyducks]

Thanks!

Thanks to everyone for their advice. I am certainly finding that being a contractor is nothing like being a permie! I will certainly be using some of the advice when negotiating. Thanks again!

[Wanderer]

It's also helpful if the client manager makes it clear to the agency that they'd be very annoyed having to re-recruit if I walked.

Also, if the agency is not on a preferred suppliers list then there is no guarantee that they would be able to recruit someone to replace you - another agency might get someone in...

[craig1]

If I get a renewal, I always expect a rate increase for the first renewal. I explain it to the agent that they've had their reward for their recruitment now they're into straight contract maintenance and they cannot justify maintaining a high margin.

I try to always find out the rate the client is being charged as that gives me a huge negotiating tool. As a project manager, I've often been in the situation of managing my own costs and invoices (subject to counter-signing obviously) so know the rate the agency is charging. I never complain on the first contract as I signed it in good faith but I will always look to reduce the margin to 10% or lower on renewal. It's also helpful if the client manager makes it clear to the agency that they'd be very annoyed having to re-recruit if I walked.

[Grinder]

Doesn't stop you talking to the client, or the client asking you your rate and you telling them if done discretely.

I personally wouldn't be surprised if the reason this is in the contract is because the agency margin is massive already.

Tell the client you like providing your services to them but the agency is cutting your rate to make it unaffordable to be there and start looking for another contract.

I have moved on to another contract, but before that happened I did talk discretely, and in fact it worked out well

[SueEllen]

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However, my contract had clauses to prevent me talking to the client about rates. I don't know whether this is enforceable or not, but I would not just tell the agency that was prepared to talk to the client direct.

Doesn't stop you talking to the client, or the client asking you your rate and you telling them if done discretely.

I personally wouldn't be surprised if the reason this is in the contract is because the agency margin is massive already.

Tell the client you like providing your services to them but the agency is cutting your rate to make it unaffordable to be there and start looking for another contract.

[Grinder]

I also smell a rat here - sounds like the agency is trying to squeeze more margin out of you. I had an agency squeeze me at the same time the client was offering more to keep me.

The next thing to do is tell the agency that you are going to approach the client and negotiate the rate with the client. This will make the agency scream like a stuck pig and backtrack very quickly if they are trying to pull a fast one on you (and the client).

However, my contract had clauses to prevent me talking to the client about rates. I don't know whether this is enforceable or not, but I would not just tell the agency that was prepared to talk to the client direct.

Personally, I would say insist on at least same rate, start to look elsewhere, and have the conversation with the client to ask whether they are unhappy with your performance. The latter is something I do regularly anyway. That way you can be sure how determined they are to keep you, or understand where you can improve.

[ChimpMaster]

Good post from Wanderer above.

I'll just add the following points. The fact the client wants a 12 month contract indicates that they need/want you to stay. In this case I doubt they would want to p1ss you off with a rate drop.

Furthermore, as already mentioned above, a 12 month contract is meaningless in most situations. My point being, that you can just go back to the agency and say that you'll take a 3 or 6 month contract at a higher rate, say £300 per day. Given that we know so little of your scenario (skills/locations/experience) it's difficult to judge whether £250 is a good rate, but generally it does seem very low considering that you have no benefits or protection.

Finally, get yourself a BATNA.

[Jubber]

Hi,

I am relatively new to contracting, having been a permie for many years. I have taken a short term contract for development work at a rate of £250 per day which runs out soon. I have been told that I will be offered a 12 month extension which is great, but they will be offering less per day because of the duration of the new contract. Can anyone give me some advice as to how much less you would expect to receive per day given the length of the contract. I need to know where it would be best to start negotiations and how low I go before the offer becomes an insult!

Thanks,

quackyducks.

Anyone else think quackyducks is a pimp?

[Wanderer]

Can anyone give me some advice as to how much less you would expect to receive per day given the length of the contract. I need to know where it would be best to start negotiations and how low I go before the offer becomes an insult!

This is part of doing business. Generally, I would try not to accept a rate reduction in return for a long contract extension because they can still give you notice at any time. Indeed, if they are extending you then it means that they like what you are doing and they want to keep you on. If anything, that's a rate increase.

The chances are that the agency are trying to get you to take a pay cut so they can increase their margin. It's likely that the client is paying the agency ~320/day and they are giving you 250. The client then says to the agency, "this is a 12 month contract so we're cutting the fee to 300/day" and they are trying to pass this on to you. Ask the agency straight up how much the client is paying them. If they are taking 7-15% of what the client is paying which is fairly normal then they will be open about it. If they are taking a lot more then they will refuse to tell you.

The next thing to do is tell the agency that you are going to approach the client and negotiate the rate with the client. This will make the agency scream like a stuck pig and backtrack very quickly if they are trying to pull a fast one on you (and the client).

Do your homework here, you've got to pitch this to the client and sell yourself.Think of what you were taken on to do. Did you achieve your goals? Did you exceed them? Are you adding value to the client's business over and above what you were engaged to do?

What's the market rate for your skills? Are you ready to move on if a better job comes up or do you have hungry mouths to feed and a mortgage to pay and would like the stability of a 12 month extension (bearing in mind they they could still give you notice at any time).

My tactic is to pitch to them what a good job I'm doing, have a load of examples to hand of where you've added value and reel off a list of upcoming projects which they don't have the resource for.

If you get down to bare knuckles then I'll accept but ask for 1 week's notice - the implicit threat is that you will simply accept the renewal and immediately start looking for a new contract.

The other tactic is to say "I'll think about it and give you my answer in a week's time". Ohhhh they don't like that, they want the negotiations wrapped up as quick as possible. Letting them stew for a while cranks up the pressure on them because they think you may be interviewing for other contracts and waiting to see if you get them.

Only you know how to play this one because it depends on how strong your situation is and how important you are to the client. It's a bit of a poker game, sometimes you win, sometimes you lose but you've gotta keep a poker face.

Good luck!

[NorthWestPerm2Contr]

Hi,

I am relatively new to contracting, having been a permie for many years. I have taken a short term contract for development work at a rate of £250 per day which runs out soon. I have been told that I will be offered a 12 month extension which is great, but they will be offering less per day because of the duration of the new contract. Can anyone give me some advice as to how much less you would expect to receive per day given the length of the contract. I need to know where it would be best to start negotiations and how low I go before the offer becomes an insult!

Thanks,

quackyducks.

Hi quackyducks. I am somebody who is not too dissimilar to yourself. I started contracting around a year ago and started on exactly that rate. I was able to negotiate my rate up to 260 after 6 months (2 x 3 months). I then moved onto another contract at 280 and now I made a huge jump in my latest offer to something I would have never imagined I could achieve. So I would advise you to demand nothing less than your current rate and if it is not met then you will simply look elsewhere. However you must consider how strong you are in the current market. With contracts the more you get the easier it becomes. I have managed to secure 5 interviews in the space of 2 weeks whereas when I was permie I was getting 1 every 2-3 months. Also make sure you keep expanding your skill set. 250 is not bad if you can get a guaranteed 12 months, but any less and it might not be worth it.

[nomadd]

You are already on a poor rate, I wouldn't take any cut, dig heels in hard and talk to the client if necessary to make sure they know about it.

You are already on a piss-poor rate, I wouldn't take any cut, dig heels in hard and talk to the client if necessary to make sure they know about it.

[lukemg]

You are already on a poor rate, I wouldn't take any cut, dig heels in hard and talk to the client if necessary to make sure they know about it.

[Dearnla]

The Agency are setting out their stall, so you should be pushing back gently along the lines of "Actually I was thinking along the lines of an increase for my next contract"

[thunderlizard]

I don't really like the way contractors try and increase rates on extensions. Normal companies do give loyalty reductions for long-term sign-ups, but it's horses for courses and that sort of thing should be on the supplier's initiative, not the customer's.

I don't think you have to take a cut at all. If you'd been transferring from a high short-term consultancy rate, then fair enough. But £250 is more like a standard development rate, and you were never charging a short-term premium in the first place. A lot of clients will try and get themselves a discount - they aren't doing their job properly otherwise - but I think you're perfectly justified in sticking to your £250

[TykeMerc]

Indeed, £250 a day is the (very) rough equivalent of a £40k salary, that's not much considering that you have to take contractors risks.

You need to be looking for an increase and not agreeing to a cut.

As others have said you've some track record as a contractor now so you should find it easier to get a new role on a more sensible rate, get the CV out on the job sites and be prepared to (politely) refuse the offer of the extension.