Home > Freelance Contractors > Negotiating Rates as a Contractor

Negotiating Rates as a Contractor

It is always hard to determine and negotiate a rate when you start contracting. However, it gets easier with time, once you get experience and you know how to assess the worth of your skills set. Before you decide what rate you are going to charge your client, it is essential to distinguish between different types of the rates, namely hourly and daily.

Hourly rate
As the name suggests, your pay is determined by the number of hours you work. Usually, the number of hours is set in advance for example between 35 and 40 to avoid you taking overtime to which your client will normally have to agree.

Daily rate
Contrary to a hourly rate, your pay is determined by the number of days you work for. For that reason, there are clients who take advantage of this work arrangement and expect you to do overtime and turn up in the office at the weekend in order to meet deadlines and finish projects.

Nowadays, contract rates differ a lot, due to the location of the contract, skill sets, experience, current market conditions etc. The following factors should be taken into consideration when establishing your contract rate:

Location of a contract - rates offered in e.g. the City tend to be the highest
Skills set - you will get a better rate if you have some niche skills that other contractors have not developed
Experience - solid expertise and your achievements are important factors that have an impact on the rate you can charge
State of the market - economic downturn and recession make most companies look to cut costs usually starting with reducing contactors rates

If you still have a problem in determining your rate, the best way is to talk to other contractors, recruitment agencies who are up to date with current trends. Another option is to use different online portals that indicate the level of skills in demand in particular regions as well as average rates that are being paid to contractors.

Professional contractors just starting out will find that flexibility and professionalism in negotiating rates are the keys to acquiring new clients and turning them into repeat clients. If you’re new to contracting and haven’t yet built an extensive client base, it is vital that you learn how to negotiate your contracting rates. You need to make sure that your clients can afford you, but it’s equally important that you are getting paid adequately for your time, services, expertise and skills set.
The following list sets out points to keep in mind when negotiating a contract rate. To ensure you will make profit and perhaps get a chance to extend your contract, remember to:

Think of your investment
Try to assess how much time and effort the project will take you and whether the amount you’d make on your potential client’s budget would compensate you for your efforts.

Be enthusiastic about negotiating
This may sound obvious but still there are a lot of contractors out there who will not negotiate their rates for fear of being blacklisted by the agency. When negotiating, it’s important that you demonstrate to your agent or client that you are willing to keep their needs in mind when hammering out a contract.

Establish the scope of their project
It is crucial to first find out how much time the project is going to take you and whether you need special equipment or software to complete it and then give an estimate on a project.

Find out what the client’s budget is
Most businesses create an estimated budget for each project and that is why you should not hesitate to ask client to confirm what amount of money the company is expecting to spend on a project.

Hold your nerve
No matter what your potential client’s expectations and budget are, if you do not stay calm, you’ll probably lose your chances of landing an assignment, and what is worse you might end up damaging your reputation as a reliable, professional contractor.

Talk about your rate with the client
Once you’ve presented your estimated rate to the potential client, allow them a few days to think about it and then offer to review the rate. Explain to them how you calculated your rate so they understand why you’re charging them what you’re charging them. If they want a rate that is still lower and you simply can’t go below a certain level, tell them so as politely as possible and recommend they find someone who can. If possible, recommend a contractor and that is how you will demonstrate your professionalism that will make you memorable.

Confirm everything in writing
Once you have gone back and forth with your potential client and have hammered out an estimate you both agree on, make sure you have all the rate details laid down on paper.

Whether you’re new to contracting or an experienced contractor, you’ll find that flexibility and professionalism especially when negotiating rates are the keys to acquiring new clients and turning them into repeat clients. Even though securing the maximum rate consists of a number of different variables determining the strength of your bargaining position, most of them may be successfully controlled by you.

Back to New to Contracting?