How to negotiate a rate rise as an IT contractor
Whether you’re a well-versed IT contractor with many years of experience dealing with tech recruitment agencies, or a newbie to the world of contracting, negotiating a rate for a new contract or extension can be awkward and nerve-wracking.
So let me share with you some of my key tips, and reveal the tricks that recruitment agents don’t want you to know, writes Matt Collingwood, managing director of IT recruitment agency VIQU.
The art of rate negotiation – the ‘science’ behind securing a rate increase:
1. Make the first offer
One of the best negotiating strategies is to seize control of the bargaining table, “my rate for this work is £500”.
Never, never say “my usual rate is” or “the rate I like is…”.
The very best contractors I’ve worked with are noticeable by setting the initial terms of a negotiation. Research has shown that rates tend to be higher when the contractor sets the opening offer. Whoever speaks first sets the terms of debate and can thus steer the discussion toward their underlying interests. So, take advantage of this by making the first offer.
2. With day rates, use concrete numbers instead of a range
If you say “between £400 and £450”, the agent will note down £400. This is because you’ve just told the skilled negotiator (agent!) how low you can go in your final offer. Don’t yield the upper hand so quickly. Don’t be afraid to say your rate is £550 and, if you must, come down from there.
3. Only talk as much as you need to
One of the shrewdest rate negotiation strategies is to harness the power of silence. In real life, silence can throw an agent off their game and impact their decision-making.
If you maintain eye contact (when face-to-face or on even on the likes of Teams) but don’t speak, your counterpart might start rambling and make concessions that they wouldn’t otherwise.
An effective negotiator will take advantage of these moments and perhaps make a counteroffer that enhances their own bottom line. Maintaining silence provides an excellent window into the other party’s point of view.
So offer your rate and then be quiet and wait for the agent to speak. You’ll notice some agents doing this to you -- when they offer their rates.
4. Keep it friendly
Your agent negotiates for a living (or at least most do!), you however, don’t.
This perceived ‘bartering’ can make some contractors feel uncomfortable. Regardless of how unpleasant it feels, keep calm, smile and stay in control.
5. Remember, the best-negotiated contracts allow both sides to win
Dealmakers who have a ‘win-lose’ mindset tend to alienate others and kill the chance for repeat business. But dealmakers who push for win-win outcomes—where both sides get something they want -- can open a lot of doors down the road. I’ve partnered with some contractors who have this approach. We’re still doing business some 20-plus years later.
Now you know these five ‘must-dos’ to succeed at rate negotiation, here’s seven subtle but significant moves to help you seal the deal.
Know your worth
Rates go up (and down). Ensure you have a full understanding of market rates by asking other contractors what they are charging and enquiring with your IT recruitment agency what the rate ranges currently are.
Identify the best payers
Understand what sort of clients (and which sectors/industries) are paying the highest rates and identify IT recruitment agencies which consistently advertise and pay fair rates.
Push up at every contract extension
Ask for a rate increase every time you extend. You have become invaluable at this stage; the client will not want to lose you. The cost and time taken to replace you often outweighs the increase. Also, your recruiter will fear losing your ‘seat’ if the client requests an alternative IT recruitment agency to replace you.
Assemble your back-ups
Always look for alternative projects in the run-up to a contract extension.
You can then tell the client and recruitment agent you have other ‘irons in the fire’ and this may encourage them to dig a little deeper into their pockets.
Mind your business
Try not to argue with an agent as to what their margin should be! This is often the issue which gets recruiters’ backs up.
Contractors don’t often see the hours of work that goes into securing the client who has the project you’re on. Always negotiate on your worth and the pounds and pence, not their margin.
Fly your flag
Too many contractors do an amazing job of delivering projects, but the client is completely unaware of what they’ve done, individually, to achieve the result.
I used to work with one contractor who would continually secure big rate rises at extension stage, solely because he consistently highlighted his worth to the client through a weekly email, detailing everything he had done that week. The client loved the details and valued his efforts. At each extension. the client could justify the increase.
Don’t sign 12-month contracts in boom markets, take <6 month contracts instead. You can then negotiate an increase, which you can’t do stuck into a 12 month contract.