According to the latest employment figures, the services sector experienced the “steepest job cuts for ten months” in August, followed promptly by a surge in available temporary workers in September. These figures suggest that right now there are many first-time contractors fresh out of full time permanent employment and seeking their first contract.
Unfortunately, my own experience as a naive first-timer who negotiated a poor first contract is still being repeated over and over again by ‘newbies’, many of whom then turn to our ‘Contractor Doctor’ when it is too late to ‘fix’ a contract.
This tends to be due to the fact that too many first-time contractors enter negotiations with their agencies when they still have the mindset of a permie (permanent employee). This means they let too much information slip, show their hand too early, and generally play a poor game of ‘contract rate poker’.
Agencies, which are commercial organisations in the business of making money and turning a profit, engage in a wide range of completely legitimate sales and negotiation techniques. Contrary to contractor myth, these are not ‘cons’ or ‘tricks’, but standard business practice to get a good deal for the company they work for. And for them, a good deal means getting a highly skilled contractor to work for a lower rate than they need to, so that the agency gets the best possible margin.
So, if you are a first-time or relatively inexperienced contractor reading this and you’ve not yet started contract negotiations or signed a contract, then read on and don’t let your agency improve their margin at your cost. So, what should you look out for?
Well, beware if your agent says something like, “Of course, you’ll work exclusively through us”. Why would you work just through one agency? Would you promise your local garage you’ll only buy your next car through them? Of course not, because your choice would be extremely limited and you would have little bargaining power. The same is true of your relationship with an agency, should you agree to work through just one.
The next question you can expect is something like, “What was your last salary?”, which, if you have only ever been a permanent employee, seems entirely reasonable. After all, there’s no point lying about your salary when going for a new permanent job because the minute you hand over your P45 your new employer will know exactly how much you earned.
But when contracting, you are under no obligation to tell an agency what you used to earn, just what contract rate you expect now. Do your homework and find out what the market rate is for your skills and experience and learn the standard response which is something like: “The rate I am looking for is around £XXX per day, and when can I expect an interview with the client?”
Finally, if your conversation with the agent ends with them asking, “Do you have any other interviews lined up?”, avoid telling them where and with whom. Simply don’t go there, as they’re just fishing to find new leads for themselves. A good answer is along the lines of, “I’ve just started looking, have some good leads and the market is buoyant. When can you set me up with a client interview?”
If you are a contracting first-timer, or relatively new to the game, bear these few negotiation basics in mind and you won’t get caught out.
The Contractors’ Handbook is full of detailed hints and tips to ensure you get the best contracts at the best rate, whether you’re a first-timer or an old contracting hand.