One of the key concerns for someone starting out as an independent contractor is how and when to review and negotiate their contract terms. As an independent contractor, make 2018 your year to do this.
For someone who has left a permanent role and is looking to embark on a new and rewarding career as a contractor, seeking tips on negotiating their first contract is a high priority.
After all, one of the perks of being a contractor is charging the rate you are worth and being able to negotiate your terms on a regular basis.
It’s important to understand that as an independent contractor you will commonly take up fixed term contracts. However, it is common for clients to ask contractors to renew their current contract near the end of the term. When a contract is extended it is the perfect opportunity to review the terms.
This means not only can you negotiate a potentially higher rate for the work you do, but look for preferable terms.
Contract extension: What to consider as an independent contractor
If your current contract is being extended then you might assume that the contract terms, including your rate of pay, won’t be adjusted.
However, you could be missing an opportunity to negotiate a better deal. Although you are renewing an existing contract, it should be reviewed and negotiated with the same care as if it were your first contract.
Even if you are comfortable in your contract, you should keep an eye on market rates for your role. If at renewal the market rates for the job have increased, then you should try to raise your rate as well. It’s important that you maintain parity with the market. However, if the rates have fallen you should seek to maintain your current rate of pay.
When considering changes to your rates, take into account the skills and expertise required to do the job. If at the start of your contract you charged lower rates and have since worked on the contract for an extended period of time, you may have increased your value to the client and maintaining your current rate might result in undercharging the client.
Don’t forget, a renewed contract is an opportunity to demonstrate to potential future clients that you can undertake long-term contracting jobs.
Contract renewals for contractors ‘inside IR35’
In order to plan and administer your accounting and taxation affairs, you need to consider the IR35 status of each contract at renewal.
Be aware that your efforts to renegotiate your contract terms and conditions may not always be successful, and the client may decide not to renew the contract. When you leave a contract it is important that you leave on good terms as they may ask you to return in future.
Independent contractors using agencies
For those using a recruitment agency, it’s important to remember that agencies usually place their client’s needs first, before those of the contractor.
They will also be looking to renew your contract with minimal hassle for either themselves or the client, so they will rarely seek an increase in the pay rate.
Also, because recruitment agencies often charge around 20% on a contract, they won’t be making much in the way of commission should you enjoy a small pay increase.
Make sure when you are using agencies and making contract changes that the terminology is clear between all parties.
Final tips on reviewing your contract terms and conditions as an independent contractor
Should you be looking to review your contract terms and conditions, it is always worth bearing in mind that you could have a strong bargaining position. If you were to leave the contract, the client will need to spend money to replace you, and would also run the risk of having to pay a new contractor more. By renewing a contract on your terms, you may be helping the client save money over the long term, whilst securing a better deal for yourself.
The contract renewal process normally begins around one month before the contract is due to end. If the client or your recruitment agency has not been in touch within this window, then it is up to you to begin negotiations. Don’t miss an opportunity!
With many industries offering independent contractors lucrative opportunities, there is always good reason to renegotiate your contract terms and conditions – whether you are new to contracting or have years of experience.
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We hope you found these tips on negotiating terms in useful.
At ContractingWISE, we are always here to help you make the most of your contracting opportunities. You can contact us by calling 0203 642 8679 or request a free call back.