Dear Contractor Doctor,
I've been offered an extension to my contract for the same rate for
another year, but it is 2 months before it expires. I think I can earn
more money elsewhere though but I know I can't really start looking until I've
got 4 weeks left on my current contract. Apparently the client cannot afford to
pay more. What would you advise?
Thanks
[Name supplied]
Contractor Doctor says:
Ah ah, that old chestnut!
Firstly, well done on doing such a good job that they have asked you to renew.
Having contracts renewed looks great on the CV and is very comforting to
prospective employers. If this is your first renewal it would be wise to renew
for this purpose. If it is your first contract then definitely renew. I cannot
stress how important it is to have contracts renewed. Contractors who have lots
of short contracts on their CVs and no renewals smell of doing a poor job.
Now, down to the negotiations. Firstly, try and negotiate directly with the
client. You are in a better position than your agent to sell yourself. Also,
bear in mind that the agent has a different set of motivations and will be
working to get what they want, not what you want.
With regard to the duration, if you do not wish to renew for a year
then you could ask for 6 months. It is unlikely they will say no.
On the subject of rate, there is no such thing as 'cannot afford to pay more'.
In your case I suspect the reason for renewing early might be that you are in
the middle of a project and the client wishes to mitigate against the cost of
you leaving and having to be replaced. If this applies to you then you are
immediately in a good bargaining position to have your rate increased. There is
always a cost of being replaced, but if you are in the middle of a project then
it might be higher and you have more to bargain with.
If you are being paid under the market rate then you are certainly in a
position to ask for more. If not, then it is not a good idea to try and get
more just because you are in a strong position of them not wanting to lose and
replace you. Remember that you do not want to burn bridges and you have the
reference at a later date to think about. Being reasonable is key.
Asking you to renew 2 months before expiry is a classic tactic
that prevents you from looking for another contract. You can't look for
another one because no one will be interested in someone who can start in 2
months. Having another higher offer in the bag when it comes to renewal gives
you the strongest chance of negotiating a higher rate. However, be careful
abou going into the market solely to play contracts off against each other. You
will get a bad reputation. Only seek another contract if you genuinely feel
that it is unlikely your current client will increase your rate to
the market rate.
Given it is 2 months before then I'd suggest asking for a higher rate
and stand your ground. If they say they will not pay you more then I'd
suggest holding out until about 4 weeks before expiry. At that point they
might start sweating and you can also look for something else. Bear in
mind that it is also unlikely they will start looking for a replacement 2
months before they need someone as it will be very hard to find someone.
You'll probably find that they will offer you something to stay rather than
boot you out and incur the cost of replacing you.
If the difference between the offer and the market rate is not much then bear
in mind the cost of looking for another contract and potentially being out of
work for a little while. See Financial Considerations when Deciding to Take a Contract
Good luck with it all.
Contractor Doctor
Updated Friday, December 21, 2007, [Originally published Friday, May 14, 2004]
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