How contractors can land a rate rise to offset IR35 reform’s impact
With the new off-payroll rules coming into force from April 6th 2020, it’s fair to say that in instances where IR35 applies, someone is going to be worse off. Except for HMRC!
The question is – who is going to take the hit? And if it does look like it’s going to be you, the contractor, are there practical steps, negotiations and strategies you can take to not just avoid the sting of IR35 reform, but to actually be compensated for it by securing a rate rise?
As an expert in helping contractors win more work at better rates, we know that they are, writes Matt Craven, founder of The CV & Interview Advisors, the host of an upcoming webinar via ContractorUK on doubling your pay as a contractor.
Some reading this will hope recruitment agencies will simply absorb their additional costs (mainly Employer’s National Insurance). But then, will agencies pass the increased cost onto the client or will they try to drive market rates for contractors down?
My guess is that all options will come into play until everything finds its natural level. But that won’t be for quite some time to come.
There has been some conjecture around rate rise tactics and how to approach this difficult conversation.
Do contractors explicitly mention IR35’s impact during negotiations? For example: “I’m going to need 20% more because tax reforms from April 2020 will increase my costs by at least 15% and up to 20%”. Or should contractors ignore the elephant in the room? For example. “Due to time served, project milestones met and inflation, I’d need to be looking at a 20% rate rise to renew my contract”.
In our experience, a combination of both would seem sensible. But everything comes down to supply and demand, plus your track record. If there is a contractor out there prepared to work for less with an equal or better track record, then you’re negotiating position is weak. Yet if you offer something unique and your track record is impressive, you’re in a much stronger position to achieve that rate rise.
So what do you need to be thinking about? We foresee one thing for sure -- it will be the contractors who are able to sell themselves the most effectively and justify their rates that will minimise the impact of the new IR35 landscape.
As we’ve said on ContractorUK previously, it won’t necessarily be the best or most appropriate candidate for each opportunity; it will be the contractor with the strongest ‘pitch’ and the most compelling ‘business case,’ showing they can add value to the client’s business.
So wherever you work on behalf of your engager’s business, you need to prepare to increase the focus you apply to selling yourself. Broadly, you can do this in three scenarios: in-contract, with your existing ‘selling’ resources and when face-to-face negotiating.
In and around these three, you should think of tactics to help you minimise the potential impact of the new off payroll rules – but here are mine, which should more than get you started:
When you’re already on-contract...
There are a number of tactics that you can use during your contract that will help you to secure contract renewals and negotiate a rate rise.
The first and most obvious is to use your networking skills to develop relationships with key stakeholders and decision-makers relevant to your remit.
Connect with them on LinkedIn and subject them to your thought-leadership activity. Constantly keep yourself and your business front of mind and raise your profile to the right people.
Secondly, endeavour to find out and record the business benefits that you and your business have delivered. Keep a list on your iPhone or get an app for this purpose, so you can add to the list of benefits wherever and whenever you find them. If engagers get nervy, it’s inevitable that just performing your assignment isn’t going to be good enough -- it’s the outcomes that you drive that will give you the ammunition to not just avoid an untimely exit, but to stay and negotiate a rate rise.
With your list, you can quickly point out that the work that you and your business did increased ‘X’ by ‘Y.’ Always work things back to financial benefits if at all possible -- this is likely to be the master key to unlocking successful negotiations as IR35 reform hits the commercial sector. So if you have a track record of delivering tangible business benefits, your rate should almost become secondary (in the eyes of your contractual partners) to the positive impact you are having, and have had, on the end-user’s profit-making operation.
All the time though, and no matter how long your list of ‘business benefits achieved,’ remember your own individual answer to – ‘Can you deliver faster, or better, than the competition?’
Where your CV and other professional profiles must come into play...
It’s somewhat obvious, but post-April 2020, you’re going to need to leverage your marketing collateral like never before! For contractors, that means you’ll need a damn good CV and stonking LinkedIn profile if you’re rates are going to stay on a positive trend.
When we provide free CV appraisals for contractors, I’m constantly emphasising the need for the CV to be 30% based on outcomes and business benefits. However the majority of CVs we see are merely a list of tasks.
I cannot stress how important your track record is -- being able to communicate this effectively in your CV and LinkedIn profile is crucial to driving up your rate.
When you’re in the negotiating room…
Having strong negotiating skills is a very useful (and probably essential) skill if you are to succeed in the contractor market.
Negotiating often boils down to who has the most to lose if the other side walks away.
Having other options on the table will certainly help your cause. But so too will making yourself indispensable; so having some unique knowledge or ability that critically affects a key part of a project might be something to strive for. In short, how can you manoeuvre yourself, while in the role, into a position of power?!
When it comes to the face-to-face, make sure you are prepared and have all your evidence at hand. Creating a ‘career autobiography,’ which is a log of all your key career events and accomplishments, is a great way to do this.
From looking at this document, plan your negotiating strategy and know what you want but also -- when you are prepared to walk away. And finally, be bold and confident about your abilities and sell to the decision-maker why they should be offering you the rate that you feel you deserve.
It may sound bland and obvious, but too many people simply ask for more money and fail to justify why, sufficiently. Mapping out the ‘why’ (having numerous justifications behind your case) and selling yourself to your client is, in many situations, enough to surge your rate rather than sink it, even in these choppy IR35 waters.
Help, tailored to you
My team will be running a webinar on how to optimise your CV and LinkedIn profile to significantly increase your rates – double them even -- on Thursday October 3rd at 7.15pm. You can register for free here: https://cvandinterviewadvisors.co.uk/cuk26thsept