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Every contractor wants to be better off, but asking for a raise is not something that everyone feels comfortable with. It can be embarrassing, awkward and, if not approached properly, can even sour professional relationships.

On the other hand, you’ll never know if you don’t ask. There’s a knack to approaching negotiations, the mastery of which can improve your chances of success and limit the risks of failure.

If you’re a freelancer looking for tips on how to negotiate your rate, we’ve got an article just for you. For now, though, let’s take a look at the ways contractors can get themselves a well-earned raise.

1. Make a business case

As a contractor, you need to be thinking of yourself as a business, not as an individual. Your motivation for wanting a rate rise might be because you’re saving up for a deposit, or because you have debts that need paying, but your clients are not interested in this.

All that matters to them is your worth as a service provider, so keep personal concerns out of it. If you want more money, you need to give a solid business case, demonstrating exactly why you’re worth the extra expense.

Give examples of where you’ve gone the extra mile for your client and show how it’s positively benefited their business. Maybe you saved a contract by putting in extra hours? State the actual figures, if you can.

It might also be the case that your responsibilities have changed from what’s stated on your original contract, in which case you have an undeniable reason for renegotiating your rate.

2. Know the industry

Do some research into what similar contractors to you are earning.

If it turns out that you’re being paid less than the average, consider why this might be. Are there certain skills that you don’t offer, which others do? If so, you may want to improve your knowledge before asking for more money. On the other hand, if you know your skills are up to scratch, this will put you in a good position to argue your case.

Think of yourself as a commodity. How available are your skills in the market, and how easy will it be to replace you? Also consider your level of local knowledge and how well you fit into the team. All of these can be used as bargaining chips.

If your client employs a similar contractor to you, it may be worth trying to find out what they’re earning in comparison. Whether to bring this up or not is a tricky decision, though, because you risk forcing your client to draw comparisons between the two of you, which might not necessarily work out in your favour.

3. Have a game plan

Think hard about how you’re going to approach the negotiation – know exactly what you’re asking for and make sure you have a plan for every potential scenario.

You should always speak to your client face-to-face about the rate increase. It’s easier for you to be convincing, and it’s also harder for them to say no straight away. Take them aside for a private chat, or book a meeting.

Also, you should know exactly how much you want and how much you’re going to ask for. It’s always best to suggest a higher number than you actually have in mind, because it gives you room for negotiation. Have a bottom limit too, and stick to it, otherwise you could be negotiated down too easily.

4. Have an exit strategy

You can always threaten to leave if you don’t get a raise, but this can turn into a game of poker, and your client could always call your bluff instead of being threatened into defeat. As such, there has to be a strategy in place for if your client blankly refuses.

It’s therefore better to enter the negotiation, if you can, with an alternative option lined up. This allows you to assert your threats with confidence. Remember to always keep things as professional as possible, though. Don’t bring any personal element into it – even if you’re definitely going to leave, you never want a client relationship to end sourly.

Whatever you do, always see your contract through to the agreed date. Be as flexible as you can with the handover period and never go silent on your old client. As a contractor, you should be striving to leave behind as many satisfied clients as possible, even if things didn’t quite work out.

Worried about IR35?

Take a look at our comprehensive IR35 hub for more information on the subject, as well as information on our IR35 service.

IR35 is a complicated piece of legislation that affects contractors.

You might think it would be easy to distinguish between a contractor and employee, but HMRC don’t see it as that black and white.

This guide goes through all the individual nuances that will be assessed to determine whether or not you are compliant with the law.

We provide sole trader accounting support to countless ambitious professionals across the UK, and we've even got lots of helpful free online resources to help keep your business operations in check - read our articles and make use of our sole trader & freelance invoice templates.

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Tom West
Community and Social Manager
Updated on
October 7, 2020

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