Contractors’ Questions: What to do if my rate gets cut?

Contractor’s Question: I’ve heard a rumour that a ‘take it or leave’ rate reduction may be incoming for us contractors at the client organisation. What might agents, unrelated to my client, actually advise us that we can do, practically, given that the last time these ultimatums surfaced they didn’t stay confined to a single sector? I know some contractors recently walked out on a ‘contract-breaker’ only to land at another contract-breaker who then imposed an even bigger pay cut. What to do?

Expert’s Answer: Contractor rate reductions of late have mainly been isolated to the financial services and banking sectors. However in 2008/9, when the cuts were first rolled out, these types of pay ultimatum did extend to other sectors, such as retail. They may therefore become more endemic.

The reality is that rates go up in good times and down in bad times. It normally falls to you to consider this fluctuation, while making a judgement as an individual professional based on your own skills and financial requirements.

  • Firstly, weigh up the effect of the reduction versus other opportunities you can see in the market; rumours are no good.
  • Then, and assuming you are contractually permitted to, apply for these other opportunities to gauge the level of interest you receive.
  • Thirdly, get hold of market information to help you negotiate – i.e. what are current market rates for your skills versus the new offer.
  • Fourth, use the industry data to confirm that you do intend to leave because the rate reduction is not, in fact, in line with how much the market is paying.
  • If your client says ‘take it or leave’ you have a decision to make – risk being without an income while you look at other opportunities, or take the reduction.
  • Finally if you do accept the reduction, ensure you agree when the rate will be reviewed (perhaps in 3-6 months) and clearly state that it may need to go up. 

The expert was Michael Bennett, director of ReThink Recruitment, an IT jobs agency.


Thursday 26th Jan 2012
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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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