Top Pointers on Negotiating Contracting Rates
“We want everything” - “We’ll give you nothing”
“We want something” - “Deal”
-Peter Griffin’s excellent negotiating skills in Season 10, Episode 13 as an agent.
You may have already read my amazing article on how much money you can make as a contractor, and now you need to know how to negotiate the rate. Unlike permanent positions, where you can negotiate salary, benefits, sign-on bonuses etc., you simply need to negotiate the contract rate and the contract length. So, with that in mind, let me give you some tips!
Have a Game Plan
Now this isn’t some elaborate plan like watching a typical movie about heists with so many unnecessary twists and turns and everyone believes they have the upper hand and are prepared for their enemies like in the episode “One Crew over the Crewcoo's Morty” from Rick and Morty, but just understanding what you are happy with and not happy with. (Can you tell what my type of humour is from my references yet? I hope not.)
Anyways, back to the game plan for contracting rates;
You need to be prepared for negotiating, if a company offers slightly less than what you’re looking for, you must understand how you are going to approach the negotiation to get the best result.
How can you do this?
This involves highlighting the extra value you would bring to the company, helping the company understand your needs, and gauging if you can push the company on certain aspects of the offer, or whether you’re risking having the offer pulled. Negotiating is a delicate process that you need to be aware of, as it is a two-way street for discussion with the company, as they have reasons for their initial offer as well.
I will be going into more detail about the specifics of negotiating the contract rates, but how you approach the negotiation from a soft-skills perspective is important to get the best result. Also, making sure you have an open discussion where you can understand where the company is coming from will be appreciated and help the cause for a better rate.
Know Your Market Value
Before you put your pinky to your mouth and ask for 1 million dollars as we would all like and put Dr Evil to shame (I really hope you get these references and they aren’t too niche), you need to know your market value.
If your role can get a contractor at a rate of €300 per day, I highly doubt a company would be willing to give you €600 for the same role. Now, if you have a very niche skill set, all power to you! This can be valuable to a company and you shouldn’t settle for a lower rate when you know your role could pay more. Knowing your market value works both ways as you can see, where you should be able to analyse if you should be receiving a higher rate or if you’re asking for too much. A great way to understand the average market value for your skills is to speak to a specialist recruiter, who has a fair knowledge of the optimal rate.
There are a few different ways to get to know your market value for a role, such as keeping in touch with what your friends or previous colleagues are making in their roles, understanding the cost of living in a certain location that may increase the rate, as we know Dublin has an extremely high cost of living compared to other cities in Europe or counties in Ireland. There is some effort which is needed to research these details, but it will be invaluable for you to get the best contract rate.
Considering the Company
Don’t worry, I’ll be talking about the actual rates soon, but I think you need to consider the role, the company and the project before considering the bottom line- your contract rate.
Is there some trait of your partner that you’re not head over heels about, but don’t care about because they make you super happy? They may not have the best fashion sense, but they do make you laugh so much you don’t spend much time looking at their fashion sense anyways. Maybe your company doesn’t have a great fashion sense, and when I say fashion sense, I mean the rate is slightly lower than wanted. Saying this, the company might have an amazing work culture that’s super flexible and the project is something you are super passionate about getting involved with, it may be worth considering the lower rate for these reasons.
I’m not saying this is the best suggestion for everyone, as a contractor you may simply want to get the rate you desire, get the project finished and move on to the next contract, and the other factors aren’t high on your priority list. Similarly, a person’s fashion sense is a dealbreaker for some people, and that’s understandable.
This is probably what you were looking forward to hearing about. Similar to any YouTube video, leaving the best point for last before ending the video and leaving a lasting impression, so let’s get into the business, the financials, and the money talk.
We all want our situation to be a case where we say “give me my money” and the company says “here you go” as if we’ll rob them if they don’t, but we all know we all need to be making money, including the company, hence the need for this blog.
First things first, you should have a range, whether it’s from €450-€500 Daily Rate that you’d accept, it’s good to have some leeway and a bottom line for accepting an offer. When you start negotiating, I would always suggest starting at the highest rate you would accept as this gives room to negotiate a better rate and settle at a rate that still falls within your ideal range.
You still need to consider the difficulty of the job, your rate in your current position and the factors that I have mentioned in my previous points, so make sure your bottom line offer does not leave you in a worse position compared to where you already are.
Another aspect to consider is the contract length. What does the value of the contract length mean to you? Would you like stability and accept a 12-month contract at €25 less than what you’d get for a 6-month contract? Contract length and rate should go hand-in-hand when negotiating, as increasing the length of your contract will increase the value of the contract even if you took a slight rate cut.
My advice: If you were offered the bottom line rate that you’d accept, I would try and explore increasing the length of the contract, as searching for a new contract could cost more as days go by compared to a slight cut in your rate expectation. Even the likelihood of contract extensions can help your decision on the contract rate.
There is a lot to consider when negotiating rates, so if you’re dealing with a recruiter, I would definitely have an open conversation with them about how to approach your contract negotiations and help begin that creation of your Scrooge McDuck money pit.
That’s All Folks
After many niche references, and many details on how to negotiate your contract rate, I think I’m happy with what I’ve shared with you. As you can tell, there’s a lot to consider, but I would say for contract roles, the money on offer definitely helps the decision. I hope this helps if you are considering getting into contracting, or if you’re an experienced contractor you have a new perspective on your negotiation skills.
I’m not going to take up much more of your time reading this, so if you do have any more questions or thoughts, don’t be afraid to reach out! Hope you enjoyed it.