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How to negotiate your contract rates using 4 simple rules

How to Renegotiate your Contract Using These 4 simple Rules

Contract Renewal and Negotiation

 

Being offered a contract renewal or extension, is always a great opportunity. As well as allowing you to continue to work within an environment that you are already familiar with, a contract renewal also presents a chance to renegotiate the terms of your contract.

 

When contract renewal comes up, you may consider asking for a pay increase, but you can also use it to negotiate better contract terms that will prove more beneficial to you as a contractor. It’s also important to remember that, whilst your client might refer to your contract renewal as an ‘extension’, giving the impression that the new contract has to be under the same terms as the one already in place, this isn’t the case. In reality, you are entering into negotiations for a ‘contract renewal’, meaning you are entitled to negotiate your position as though you were entering into the contract for the first time.

 

Here’s our step-by-step summary of 4 easy steps to negotiate a contract like a pro.

 

Research – Get the timing right

 

Timing is everything when you’re renegotiating the terms of your contract. Aim to open the discussions around four to six weeks before your current contract expires. This will give your client time to consider your proposal and seek approval from the relevant parties within the organisation.

 

Leaving plenty of time also means that you’ll have the opportunity to look for your next contract elsewhere if necessary.

 

The Market

 

When it comes to contract negotiations, your timing in terms of the market is crucial. Before you start negotiations, you should research the market, considering:

 

  • The state of the market
  • The demand for your skills in your area
  • Your level of experience
  • What other contractors in similar roles are being paid

 

If, for example, the market has risen since you negotiated your original contract (meaning you could potentially earn a higher rate elsewhere), you will be in a strong bargaining position. On the other hand, if the market has dropped, then a rate rise is unlikely, and you should consider looking at other aspects of your contract to see if you could benefit that way.

 

Finally, if the market remains unchanged since your initial terms were agreed, but your skills have increased, making you worth more in the market, then you can still justify requesting a higher rate.

 

Negotiate – It’s not all about pay

 

Of course, when it comes to renegotiating your contract, it isn’t all about your rate of pay. There are other benefits in the contract that can be renegotiated in order to improve your terms. So, for example, if you are currently inside IR35, you can renegotiate the contract terms to get yourself outside of IR35. This could actually prove more financially rewarding than negotiating a small pay rise.

 

Persuade – Justify new terms

 

When you’re attempting to renegotiate your contract, you need to be prepared to support any changes in terms that you’re asking for. If, for example, you’re asking for a pay increase, you’ll be expected to make a strong case.

  • Have your skills improved?
  • Has your role changed?
  • What value did you add to the business during the current contract?
  • Have the market conditions changed?

And, although using the fact that you have other potential contracts in the pipeline can work in your favour, don’t use this as an empty threat – only tell your client or agent you’ve been looking at other roles if you are genuinely willing to walk away from the contract if your negotiations aren’t successful.

 

Pitch – Stay professional and make your case

 

The pitching process will vary depending on whether or not you’re working through an agency, or directly with the client.

If you’re working with an agency, always approach them first. They are experienced in handling negotiations and may help you to argue your case. Make sure to pass all of your information and the reasons for your request through them. If you’re working with the client directly, you’ll need to approach your line manager. It’s often effective to request a face-to-face meeting with the relevant decision maker so that you can present your pitch.

 

Throughout your contract negotiations, it’s important to remain professional and calm, even if things don’t go your way. After all, your reputation within your industry is everything and word spreads quickly. The last thing you want is to leave with a bad taste in your mouth and then find that you are unable to secure work elsewhere when you need it. With this in mind, even if the contract negotiations aren’t successful, leading to you not renewing the contract, you should ensure you leave on good terms, without burning bridges, and hopefully leaving the possibility for future contracts with the client open or even a positive referral for another project.

 

Remember that negotiating doesn’t have to be a win/lose situation and even if the new terms are not exactly what you were aiming for 100%, there is always an opportunity to learn from you current project and negotiation process as well.

 

At Contracting Scout, we aim to help contractors every step of the way and have solutions here to help you make the most of your rates. To learn more about negotiating tactics for your next contract, download our free guide to negotiating a contract renewal here.

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