How contractors can secure a 15% IR35-related rate rise

With the ‘soft landing’ of the off-payroll rules having ended on April 6th, contractors at affected client organisations are understandably asking how they can get their rate up before too much nervousness sets in, writes Adrian Smith, senior director of operations at Randstad UK.

Before you can entertain any serious answers as to what your magic number is, it’s worth considering that the impact of the new IR35 rules on contractor take-home pay, initially, was in the region of a 10-25% reduction. That’s for PSCs in scope of the refreshed IR35 of April 6th 2021.

If the thought of asking someone who probably already feels like they’re paying you enough for a rate increase brings you out in a cold sweat, remember; you are not alone.

From what we’re seeing in the IT contractor space, let me share my top tips.

1. Don’t ask, don’t get

First and foremost, you simply need to act. I appreciate that might sound trite. But not everybody does act. 

Our research suggests permanently employed women, for instance, are less likely to ask for a raise – averaging just two pay rises every five years, compared to three for men. 

Just remember here the old adage, “Don’t ask, don’t get”.  t may be nerve-wracking to put yourself forward for more money, but you might find you get exactly what you want -- and live to tell the tale!

2. Know your worth

The next key thing is to know your value. The last thing you want is to make an unplanned stop at the line-manager’s office and demand a raise without researching it. Chances are an off-the-cuff request will be rebuffed. 

It is important to take a look at comparable contracts and/or vacancies within your industry so you get to know the average pay for your current role. 

As part of the research process, start to think of asking for more cash as if you were going for an interview. Think about what you can offer. What you are worth. What skills you have.  Begin to think of it as building a case for court, and take with you evidence of appropriate pay in your business and the wider industry.

3. Face-to-face, exude/evidence the extra 15% you deserve

In the meeting, be confident. Look back over the work you have done and compile a list of your achievements or project milestones met. 

It’s good to demonstrate how or where you have added value to an organisation (even as a contractor), potentially in terms of projects completed, tasks executed, or if customer-facing, testimonials or endorsements won. 

It’s important to highlight areas within your contract where you feel you have gone over and above the requirements; including if you took initiative to achieve a goal or where your work led to impressive results. 

Most decision-makers will listen to someone who can show what they have done to help further the project; the division, or even the department’s team/capabilities and knowledge. Across both contract and perm, candidates who demonstrate consistency, value and good, solid work tend to walk away with the extra.

4. Their number first

Negotiations are also about patience. If possible, get the client or decision-maker to disclose a number before you share what you are looking for. This can be awkward. If you feel uncomfortable waiting, provide a range based on your research and comment that you ‘Expect a fair rate that takes your qualifications/experience/value-add/early project completion into consideration.’ 

Oh, and ask for more than you expect (because you won’t be the only one negotiating) but don’t be unreasonable. You don’t want them to agree immediately and be left wondering if you could have got more. Equally, you don’t want to look greedy and ill-informed.

5. Keep still, as part of holding your nerve

What should you not do when looking for an IR35-related rate rise? 

Two things are real no-nos.

First, don’t ruin it with your body language. Avoid fidgeting. Don’t let your gaze wander. Don’t cover your mouth while speaking. Don’t look like you’re lying, or unsure of your facts. 

On the flip side, subtly mimicking their posture and/or gestures subconsciously engages a person, helping to get them on your side. And for your part, sitting up straight, making eye contact, and speaking slowly and deliberately are all signs of confidence. 

6. Tone, time, and place

Second, don’t have a go at your client representative or agent about your rate rise – and worse still, don’t have a go at them about it at a social event!

With the world opening back up from covid, there will be office parties upon the horizon – even parties that contractors might want to attend! Asking for a higher rate there couldn’t be more low-grade. And asking in a churlish, peeved off-way – even if time and place is appropriate -- could severely lower your chance of success.

Final considerations as your take-home suffers

There’s no magic bullet. Different decision-makers respond to different approaches.

But generally speaking, we advise contractors to be proactive, patient, market-savvy and ready to negotiate. Tell yourself; ‘This is my contracting career and nobody is going to advance it or enrich it on my behalf.’ If you believe you deserve a higher rate, don’t sit around and wait for someone to notice; ask for it then politely but firmly, go get it. And all the while keep in mind; it’s a case of get an additional 15 per cent or live on less take-home pay -- and with the cost of living rocketing, no one can afford that.