Contractor Rates are normally market driven which means that if demand for your particular skill set is high then you can charge more and negotiate better rates than when there is a less demand. Contractors choose to be paid hourly or daily and this needs to be communicated to your clients upfront. If you use an agent to find your contracts, then your rate will be set by them but this can be negotiated.
Always research the market rate by comparing the market rate for your line of work to the rate that you normally charge or that your agency pays you. It is always difficult to negotiate your contractor rates but using facts from the market place should be used as a back-up. Your contractor skills are dynamic as supply and demand for them are always changing.
Always communicate with all parties concerned clearly and negotiate your rates according to the market demand. Make sure that you are well prepared by negotiating your rate with well-presented facts and examples of previously completed work. This will reflect your skillset, quality of your work and your experience.
To understand market rates it is essential that you keep up-to-date by monitoring job boards online and if possible contractor publications and recruitment company salary surveys.
The best policy to maximise your rate is to ensure that you do not have gaps between contracts and that you charge a high rate that reflects the project scope and your skills/experience.
Working with an Agency
Agencies are normally up-to-date with current market rates and are well equipped to negotiate the best rates for contractors. They can also help you avoid gaps between your contracts by constantly negotiating new contracts for you.
At the same time, you have to be able to use key negotiating skills to receive the highest rate from your agent. A typical mark-up on your rate starts from 12% and can be as high as 20%.
As a contractor, your professionalism is a valuable asset and can aid you in your contractor rate negotiating process. It is vital in maintaining a solid relationship with the team you work with, your manager, your agency and your client.
Your reputation precedes you and your contacts will recommend you to others based on this. Future clients will also take these factors into account and your current client and manger will hire you again if the relationship they had with you was professional.
Securing Rate Increases
Requesting rate increase
- Offer a rate increase request in writing using email via to your client. If you use an agency, then submit it via them instead
- You should include a summary justifying the rate increase so mention factors like market demand and head hunters. Also mention that you are happy with the client’s working environment and their staff
- Propose a review date where this can be discussed
Successful rate increases
It is important to note that rate increases are normally secured by contractors who have a solid relationship with all the client’s employees, are always professional, get on with the job and an expert in their field. Hence when requesting a rate increase, clients are more readily open to an increase when you have a good reputation with all parties involved.
Note that contractors can also request rate increases when increased responsibilities are added to the project scope. Before agreeing to any responsibilities you should discuss and agree on your rate increase first.
Tax Efficiency using a Limited Company
A contractor wants to take home as much as possible, so opening a Limited Company is the most tax-efficient option. At Fusion Accountants, our team of Expert Accountants will offer you tax advice on the guide you on how to open and run a Limited Company as a Contractor to ensure that you maximise your earnings.