Contract rate negotiation: How to negotiate a rate rise

Bigger tax takes on the contractors' lot will keep agents busy with requests from freelance IT professionals that their rate of pay should increase.

Whether it is the new financial year, contract renewal, or simply bigger workloads; contractors are adept at citing reasons why they deserve a contract rate raise.

Yet contractors admit they're less proficient at selling themselves. Below, leading recruitment agents reveal their top tips to help contractors negotiate and secure that elusive premium.


Kevin Thorn is a founding partner of recruitment agency e-resourcing Ltd. He is also a spokesperson for the Recruitment and Employment Confederation's IT & Communications Sector Group

"Firstly, accept that everyone on the earth wants more money – it's human nature!

"Secondly, accept that there is a dynamic market place for skills, no one is irreplaceable!

"Don't worry about sounding arrogant: it's a marketplace for skills. Communicate clearly and definitively when you negotiate.

"Prepare yourself that if a client won't give you a contract rate increase then you need to decide, stay or go, albeit in line with your contractual obligations.

"Contractors should remember that personal circumstances should not have a bearing."

Things to do

Neil McCreadie is a managing consultant for IT Infrastructure & Operations recruitment at Hudson, the global staffing agency.

"Ensure your job title reflects the role you are doing. Quite often your role will evolve over time & if HR/IT Management see a contract rate review request they may base their decision on job title alone.

"Understand what the market is paying for your skill set. You can do this by monitoring the job boards, IT publications (which often publish contract rates), obtaining recruitment companies' salary surveys. You will need to quote reference points when negotiating.

"If possible, try and get your immediate line managers buy-in if they are not the overall decision-maker. Avoid the overall decision-maker until your case is pulled together and ready to present."

Who to approach and how

Kevin Thorn, e-resourcing Ltd/REC IT & Comms Sector Group: "Don't discuss your full financial position.

"Always approach your agency first - as they will have a greater view of other candidate's rates and therefore can better argue on your behalf, although time spent researching appropriate free rate data is time well spent, as this can ultimately save you time."

Jeremy Finch is managing director of Praxis Executive, an interim management provider of IT professionals.

"Generally it is always better to discuss the appropriate IT contract rate for the assignment and not the rate for the individual - just because you got £1000 per day last time doesn't mean that this assignment is worth that this time.

"IT Contractors should remember; it's not what you do it's the way that you do it! It's always helpful if you can produce some evidence that a higher rate is justified - has the assignment changed in nature since you started?

"If you agreed to the rate at the start and the assignment hasn't changed materially then very difficult to justify an increase without annoying people.

"Generally with interim contracts the rate is set for the duration from the start, the opportunity to discuss an increase in rate is only if the contract is extended or a new contract is started for a different role."

Agency says no

Kevin Thorn of e-resourcing Ltd/REC IT & Comms Sector Group:

"If the agency cannot get you the rate increase you want, you really have two options, you can stay and be content, or you can use your feet and leave, either way check your contract thoroughly.

"The agency may also have a proportion of its margin it can pass on to a contractor - although you should bear in mind that when working in a tight, low margin PSL agreement it is unlikely that the agency can afford to lose any of their margin.

"Use your agency as a buffer as it is more likely to result in a rate increase without it becoming a personal battle."

Keep it sweet

Neil McCreadie of Hudson recruitment:

"It is hugely important that you maintain your professionalism throughout the negotiation process. Even if you end up walking away from a client because they won't increase your contract rate it is imperative that you fulfil your contract and carry through the terms of your agreement.

"This will ensure you do not burn your bridges with the line manager and further more with the client as a whole.

"Remember you may need that client in the future (if the market hardens) and should your existing line manager ever move on he/she may want to hire your services with their new employer."

Kevin Thorn of e-resourcing Ltd/REC IT & Comms Sector Group:

"IT Contractors only risk losing their good relations with the client and the agency when they act unreasonably or don't follow the terms and conditions of the contract."

How to present a rate rise request

Neil McCreadie of Hudson recruitment:

1. Submit a request to increase in writing (e-mail will suffice) - via your agency . This should include:
Headline with your current rate, length of time worked for the company, role title (when hired and current title) and new rate desired.

Followed by a number of bullet points clearly stating:
- how/if your role has changed ?
- what the market rate is for your skill set (quoting reference points)?
- any people within the company who can vouch for the work you have been doing (references)?

2. Ensure that the request is submitted via your agency using your words so the tone of your request is never misinterpreted as a demand.

Choose your words carefully and state that you enjoy working for the company and the people involved. People are generally far more inclined to give you what you want if you don't push them into a corner.

3. Remember you are selling yourself and the value of what you do and that this process will need to involve a degree of humility - no-one is irreplaceable.

4. Regardless of the client's answer, try to set a date for the next review and thank them for considering your request. If you are unhappy with the answer then you can maybe take a harder line with them.

Again never threaten the client, just make it clear that you will open yourself up to approach offers from elsewhere. With the market the way it is, you are likely to be getting head hunted on a regular basis and this again can make a client sit up and think that you are worth the increase.

Why you were successful

Neil McCreadie of Hudson recruitment:

"In my experience, most successful rate increases are granted because the contractor is low maintenance, has strong relations with the companies' employees (from the top to the bottom) and is very good at what they do. If you are struggling with any of these ingredients then any request could meet with a negative response.

"If you follow the above negotiation process then I would be very surprised if you would jeopardise your relationship with client company or agency. You would maintain your professionalism and dignity and everyone whether permanent or contract is entitled to ask for an increase in remuneration."

Kevin Thorn of e-resourcing Ltd/REC IT & Comms Sector Group:

"There is no tried and tested method. Clients need a reason for a contract rate increase. That reason can be a change of role, responsibility, deliverable, or the reason can be that the market rate for a skill has demonstrably shifted. Check the facts and negotiate on that basis."

Editor's note:

Further Reading:-

Resisting rate reduction for IT contractors

Negotiating for contractors: How to get the best IT contract rate