There has been some potentially great news for contractors this week. According to Chairman of the US Federal Reserve and respected economic commentator, Ben Bernake, the recession is ‘very likely over’.
Why is this great news for contractors? Because there will be more opportunities for contractors as organisations hire low-risk, flexible workers to take advantage of increasing markets. And, as demand for contractors increases, market forces dictate that rates will increase too.
However, many clients of contractors currently in a contract won’t see things this way. It seems that it’s OK for them to hammer contractors with lower rates when markets weaken, but it’s not OK to increase rates when they improve. And those very same clients who won’t increase rates with market conditions are often the very ones who expect loyalty from their underpaid contractors.
For many, if not most, contractors who want to take advantage of the market-driven rises in rates in some sectors, the only course of action open to them will be leave contracts they find fulfilling and clients they enjoy working on projects for.
During the last major downturn for IT contractors, the dot com crash, rates virtually halved. Then, when the IT market started to recover, so did rates, but much more slowly. In fact, because I’d invested heavily in enhancing my skill set, my going rate had risen 50% more than what I was then being paid.
At that time, I was leading a development project with seven months left to run and a contract renewal due in four weeks. The agent had already phoned and said: ‘Great news – they want you to stay, but there’s no more money.’
Now, that’s not my definition of great news, so my contract renewal Standard Operating Procedure (SOP) kicked in and I started to look for and win other contracts. With several contract offers in hand, I went to see the client and asked them to me pay me the market rate or I would have to leave. The agent told the client that market rates had not increased, and tried the same with me, but copies of offer emails for other contracts soon shut them up.
The client then played the loyalty card, saying, ‘We expect our contractors to be loyal to us.’ My response was, ‘I want to finish this project, but not when I’m being underpaid by 50%. Pay me market rates and that buys you all the loyalty you’ll need.’
The client even tried the career enhancement card, saying, ‘This is great project that will seriously enhance your CV.’ My response was, ‘There are a lot of other great CV-enhancing projects out there and I’m having no trouble winning contracts to work on them.’
The client then called my bluff, refusing the rate increase and advertising the contract to find a replacement contractor. Strangely enough, when they went to the marketplace, they could find no one with the right skills prepared to work for the rates they were offering!
Finally, the client mysteriously found the budget to pay me the market rate and I completed the project. But the damage was done and I chose to leave at the end of the project, never to return.
As the economy recovers and the demand for contractors increases, don’t expect your rates to increase without you putting up a fight. If you want to stay in your current contract, be well prepared for that fight, making sure you’ve got the facts to back up your demands.
And, if the client just won’t listen, then remember you don’t have to suffer in silence. You are a contractor, not an employee, and you can move on to a client who recognises what you are worth and pays the market rate.