As a limited company or umbrella company contractor, being able to negotiate effectively on the contracts that you accept is an essential skill. The name of the game is obvious, you are trying to get the highest possible pay rate for the skill set that you have on offer. The challenge of course is being able to sell yourself and secure contracts at competitive pay rates.
In general, contractors tend to see higher pay rates than that of permanent staff, much of which is due to contractors being able to negotiate their pay rates as they generally have a specific set of skills that the company is in need of utilising. Therefore, as an umbrella company or limited company contractor, it's always worth your while to polish up on your negotiation skills. In this article, PayStream provide you with our top 5 tips into the art of contract negotiation.
Your contract rate can dramatically vary depending not only on your skill set, but also on the industry you are operating in. Industries such as IT and Oil & Gas have experienced a successful boom in recent months giving contractors within these industries the ability to demand much higher pay rates.
If you have a niche skill set that clients are struggling to source you will find yourself with strong bargaining power, so don't be afraid to use it. Make your potential employer aware that you would be willing to walk away should you not be offered a competitive level of pay. You should always go into the negotiation with high expectations and be willing to compromise, but remember to never undersell yourself.
At the same time it is important to ensure you remain fair with your contract rates, if you overprice and under deliver, you could cause a lot of harm to your reputation and long term success.
In order to negotiate effectively, it is essential to be aware of current industry pay rates for your job title and skills set. If not you could fall victim to consultant pay rate estimations which could result in you earning less than you're worth.
It is important to remember that pay rates change over time and can vary depending on region so it is important to keep up to date.
One of the best ways to seek industry averages is by asking other contractors operating in the same field as you, giving you an industry average benchmark.
Utilise seminars, training days and online training programs to your advantage so that you continually add value to your skills set. Not only does this improve your ability to do your job better than other contractors but, when pitching to potential clients, you're enhanced skills set and industry knowledge will give you greater leeway to negotiate higher pay rates.
When first starting out as a limited company or umbrella company contractor it can be easy to slip into the routine of accepting every contract you get offered, be it big or small, in order to maximise your overall take home pay.
However, this may not always be the best solution for the long term. Working for well known, larger companies with bigger budgets can not only boost your professional image but could also lead to longer term contracts, which would give greater financial security and more take home pay in the long term.
Remember, if you have strong bargaining power, then use your negotiation skills to demand higher pay rates.
When negotiating pay rates it can be easy for contractors to set a standard pay rate and stick to it for numerous contracts. This is especially true when a contractor finds themselves taking on a new contract with the same company. However, it is important to remember that each contract should be reviewed in isolation and if the contract requires the use of a different skill set then the pay rate should also be revisited along with the new contract terms.
Therefore, when negotiating get a rough estimate to the time, level of work and the skills set needed for each contract and individually quote for your client.
Remember following these simple but golden rules could result in higher take home pay. Always aim high for pay rates and be willing to comprise if the contract is valuable to you. Always ensure that you are in a strong position if you are considering walking away should the pay rates not meet your expectations. Finally, don't hesitate when it comes to negotiating your contract renewals and remember to use your skills set and up to date industry knowledge as leverage.