Rate increase - how do I achieve it?

IamtheWalrus · 18-03-2014 9:05pm #1

My year long Java development contract ends at the end of April. I have been told a 6 month extension is on the cards. My client is with a consultancy that has placed me one of their client sites (direct, no agent).

A colleague got an extension but his rate increase request was turned down (they claimed that my colleague was already on market rates). Another colleague's rate went from 425 to 475. He said it wasn't easy getting it and was told at one point that there would need to be a parting if he didn't sign. He asked for 500. My rate is £400. I've since found out my consultancy charges £600 for me.

I would like the extension and would be happy to take it at the same rate but would obviously like more.

So, how to I play it when I get the inevitable rate increase refusal. I know the my client is desperate to keep me because basically they are body-shopping me to the end client. If I say no and be prepared to walk, are they likely to let me walk and go from making 200 on me to making zero? Surely, they'll want appease me.

How do I go about it and is a rate increase likely?

IamtheWalrus · 19-03-2014 10:53am

Beg maybe?

moycullen14 · 19-03-2014 12:30pm

IamtheWalrus wrote: »

My year long Java development contract ends at the end of April. I have been told a 6 month extension is on the cards. My client is with a consultancy that has placed me one of their client sites (direct, no agent).

A colleague got an extension but his rate increase request was turned down (they claimed that my colleague was already on market rates). Another colleague's rate went from 425 to 475. He said it wasn't easy getting it and was told at one point that there would need to be a parting if he didn't sign. He asked for 500. My rate is £400. I've since found out my consultancy charges £600 for me.

I would like the extension and would be happy to take it at the same rate but would obviously like more.

So, how to I play it when I get the inevitable rate increase refusal. I know the my client is desperate to keep me because basically they are body-shopping me to the end client. If I say no and be prepared to walk, are they likely to let me walk and go from making 200 on me to making zero? Surely, they'll want appease me.

How do I go about it and is a rate increase likely?

Where are you based, by the way? Just to clarify, you are contracting to a consultancy who have you on placement on the client site. Consultancy gets 600 (euro or sterling?) and you get 400. Is that right?

Anyway, from years of negotiating extensions - some failed, some successful - my take on it is:

You have to threaten to walk and you have to be prepared to walk.
50% markup is v high for an agent only arrangement but not high for a consultancy (consultancies regularly charge bodies out at 1500/day but the bodies only see a fraction of that).
Although it sounds perverse, some agents will be happy to see you go rather than decrease their margin. Why? because their margin is their business and they won't screw with it.
Go and see what you can get elsewhere. If you can beat the current rate, use that as a negotiating stance.
You can attack the margin or the rate. You just can't do either over and over.

In my experience, there is no shortage of IT personal, only a shortage willing to work at a prescribed rate.

Good luck and let us know how you get on.

IamtheWalrus · 19-03-2014 12:36pm

moycullen14 wrote: »

Where are you based, by the way? Just to clarify, you are contracting to a consultancy who have you on placement on the client site. Consultancy gets 600 (euro or sterling?) and you get 400. Is that right?

Anyway, from years of negotiating extensions - some failed, some successful - my take on it is:

You have to threaten to walk and you have to be prepared to walk.

50% markup is v high for an agent only arrangement but not high for a consultancy (consultancies regularly charge bodies out at 1500/day but the bodies only see a fraction of that).

Although it sounds perverse, some agents will be happy to see you go rather than decrease their margin. Why? because their margin is their business and they won't screw with it.

Go and see what you can get elsewhere. If you can beat the current rate, use that as a negotiating stance.

You can attack the margin or the rate. You just can't do either over and over.

In my experience, there is no shortage of IT personal, only a shortage willing to work at a prescribed rate.

Good luck and let us know how you get on.

London and it's sterling.. I make 400 and the consultancy (not an agent) gets 600. Surely the fact I know the situation with my colleague (he went up to 470) that they'd prefer to keep me as opposed to lose income altogether?

Bear in mind, this consultancy do nothing more than take a cut, provide me with a laptop and a meal at Xmas.

moycullen14 · 19-03-2014 12:56pm

IamtheWalrus wrote: »

London and it's sterling.. I make 400 and the consultancy (not an agent) gets 600. Surely the fact I know the situation with my colleague (he went up to 470) that they'd prefer to keep me as opposed to lose income altogether?

Bear in mind, this consultancy do nothing more than take a cut, provide me with a laptop and a meal at Xmas.

Well then they're an agent masquerading as a consultancy and the cut is waaaay to high. I know it sounds crazy and you would think that they would be better off keeping you at a lower margin but that's not quite how they see it.

The problem here, for them, is that you know that your mate got £470. Now if they cave to you, the next guy will want £470 and so on. It may be better from their point of view to let you go and get someone else in on £400 and not run the risk of a stampede for higher rates. BTW, I'm not condoning this - (most recruitment agents, imho, are completely amoral - they have to be to do the job) - just don't assume they will do what seemsm to be the sensible thing. They are playing a longer game.

To answer your original question, get the client on board. Get him to agree that the agent is raping them and you and that you can't carry on subsidising an agent THAT IS ADDING NO FURTHER VALUE to either party. The agent doesn't care about you but will care about jeopardising potential future business with the client and may cave under pressure from the client. If you can get the client to push for a margin decrease, that usually is best - they might up the rate as well/instead. OTOH, if the client doesn't care or won't do anything - leave, simple as that.

London is great. Plenty of opportunities there. If you were in Mullingar, advice might be somewhat different

IamtheWalrus · 19-03-2014 2:09pm

moycullen14 wrote: »

Well then they're an agent masquerading as a consultancy and the cut is waaaay to high. I know it sounds crazy and you would think that they would be better off keeping you at a lower margin but that's not quite how they see it.

The problem here, for them, is that you know that your mate got £470. Now if they cave to you, the next guy will want £470 and so on. It may be better from their point of view to let you go and get someone else in on £400 and not run the risk of a stampede for higher rates. BTW, I'm not condoning this - (most recruitment agents, imho, are completely amoral - they have to be to do the job) - just don't assume they will do what seemsm to be the sensible thing. They are playing a longer game.

To answer your original question, get the client on board. Get him to agree that the agent is raping them and you and that you can't carry on subsidising an agent THAT IS ADDING NO FURTHER VALUE to either party. The agent doesn't care about you but will care about jeopardising potential future business with the client and may cave under pressure from the client. If you can get the client to push for a margin decrease, that usually is best - they might up the rate as well/instead. OTOH, if the client doesn't care or won't do anything - leave, simple as that.

London is great. Plenty of opportunities there. If you were in Mullingar, advice might be somewhat different

Thanks for the advice. To be honest, I don't think my client would like to get involved. But maybe I'll try. I'm not sure how I'd even approach it.

The rate for every consultant with my agencies, at this client, is 600 regardless of level.

I'll suppose I'll play it by ear.

stevenmu · 19-03-2014 3:23pm

moycullen14 wrote: »

To answer your original question, get the client on board. Get him to agree that the agent is raping them and you and that you can't carry on subsidising an agent THAT IS ADDING NO FURTHER VALUE to either party. The agent doesn't care about you but will care about jeopardising potential future business with the client and may cave under pressure from the client. If you can get the client to push for a margin decrease, that usually is best - they might up the rate as well/instead. OTOH, if the client doesn't care or won't do anything - leave, simple as that.

That's a very dangerous game to play IMO. If word gets back to the agency/consultancy, and it's very possible it would if they have a good relationship with the client, the OP would be out on their ear with zero chance of a reference.

moycullen14 · 19-03-2014 3:38pm

stevenmu wrote: »

That's a very dangerous game to play IMO. If word gets back to the agency/consultancy, and it's very possible it would if they have a good relationship with the client, the OP would be out on their ear with zero chance of a reference.

A reference? From an agent? Heard it all now. You do realise that these people eat their young. They don't DO references.

IamtheWalrus · 19-03-2014 3:43pm

moycullen14 wrote: »

A reference? From an agent? Heard it all now. You do realise that these people eat their young. They don't DO references.

But I don't have an agent - it's an small, but established, consultancy.

cregganna · 19-03-2014 3:49pm

As moycullen14 said, use the client to drive down the agent margin but be careful discussing actual rates as your contract might forbid you to do so.

Use www.jobserve.co.uk to get idea of rates. If you can stand the nightmare of doing the interview round again don't be frightened of pushing the nuclear button. Unless, of course, you enjoy the role. It's all part of contracting.

I won't give my opinion of agents as I would be banned.

IamtheWalrus · 19-03-2014 4:07pm

cregganna wrote: »

As moycullen14 said, use the client to drive down the agent margin

What would I say to the client? How are they going to convince the consultancy to effectively take less pay whilst the client's rate is the same? That would be a bit cheeky of the client surely?

moycullen14 · 19-03-2014 4:24pm

IamtheWalrus wrote: »

What would I say to the client? How are they going to convince the consultancy to effectively take less pay whilst the client's rate is the same? That would be a bit cheeky of the client surely?

Try this. 'Look, I have no problem with the agent getting paid - handsomely - for search and selection. That's where they add value. But after a year (6 months, whatever), they have earned - in this case £200 x 100 days = £20,000. I think that that's enough and a reduction in their cut reflects a reduction in their costs on this assignment. I mean, what are they going to do to earn £20,000 for the next six months?'

In my experience, there is very little loyalty between anyone in this unholy alliance.

Keep making the point to the client that they are the ones paying and that they are paying for your services. Continuing to pay the agent a fat commission is taking money out of their pockets. If they don't sort it out, you will walk (carful here, make the point that ANYONE would walk) and that will cost them more money in the long run, put contracts at risk, blah, blah. If they want to hang on to you, they'll do it. If not, they won't. No client should be in an agent's pocket. Most aren't. Agents are 10 a penny. The reason their practices are a bit 'risque' is that they have to be. Huge competition and very little to differentiate them and, most importantly, they add ZERO to the quality of the work undertaken.

He who pays the piper calls the tune - in this case, it's the client.

IamtheWalrus · 19-03-2014 4:36pm

moycullen14 wrote: »

Try this. 'Look, I have no problem with the agent getting paid - handsomely - for search and selection. That's where they add value. But after a year (6 months, whatever), they have earned - in this case £200 x 100 days = £20,000. I think that that's enough and a reduction in their cut reflects a reduction in their costs on this assignment. I mean, what are they going to do to earn £20,000 for the next six months?'

In my experience, there is very little loyalty between anyone in this unholy alliance.

Keep making the point to the client that they are the ones paying and that they are paying for your services. Continuing to pay the agent a fat commission is taking money out of their pockets. If they don't sort it out, you will walk (carful here, make the point that ANYONE would walk) and that will cost them more money in the long run, put contracts at risk, blah, blah. If they want to hang on to you, they'll do it. If not, they won't. No client should be in an agent's pocket. Most aren't. Agents are 10 a penny. The reason their practices are a bit 'risque' is that they have to be. Huge competition and very little to differentiate them and, most importantly, they add ZERO to the quality of the work undertaken.

He who pays the piper calls the tune - in this case, it's the client.

Does your point change when I say I don't work through an agent. I work through a consultancy that has provided people to this client for 5 year.

They are not your typical scallywag recruitment agent.

moycullen14 · 19-03-2014 4:56pm

IamtheWalrus wrote: »

Does your point change when I say I don't work through an agent. I work through a consultancy that has provided people to this client for 5 year.

They are not your typical scallywag recruitment agent.

The devil's greatest trick was convincing people he doesn't exist.

Next best was convincing you that your agent was a consultancy

If it looks like a duck.....................

I get the sense - correct me if I'm wrong - that you don't really want to upset anyone here. Fine, but in my first post I said that before you start any negotiations on money, you HAVE to be prepared to walk. I don't think you are and, more importantly, I'd say the client and the agent/consultant know that too. If so, you will fail. Man up, FFS. Go in and break some bottoms.

DublinWriter · 26-03-2014 9:54pm

IamtheWalrus wrote: »

They are not your typical scallywag recruitment agent.

If they're charging the end-client a 50% markup, then no, they're not. No agent would have the balls to charge that kind of commission and best of luck in negotiating a rate-rise with them. If you havn't been working for their client too long then your business knowledge of the client will be next to zero and you're easily replaced.

IamtheWalrus · 27-03-2014 8:11pm

Would telling my consultancy I'm doing interviews in an attempt to make them fear losing me do any harm?

moycullen14 · 28-03-2014 11:09am

IamtheWalrus wrote: »

Would telling my consultancy I'm doing interviews in an attempt to make them fear losing me do any harm?

Look, you're a contractor. The 'contract' between you and your client/agent is a very simple one - in fact, it couldn't be much simpler. You supply expertise, effort, professionalism and they provide money. That's it, pure and simple.

You cannot and should not EVER depend on your agent (even if they are a 'consultancy', for you they are an agent) providing you with ANYTHING other than money. Cut through all the crap about career, development and everything else - they regard you as a cash cow. You must regard them solely as a source of money.

It is in their interest for you to regard the relationship as being 'more' than that. It isn't and you shouldn't.

You cannot and should not contract if you are not prepared and able to walk from an assignment.

To answer you're question: No, don't tell them you are going for interviews - it's meaningless and a bit needy. Go for the interview, get an offer and THEN tell them. I guarantee you they'll take some notice then IF (and it's a big if) they want to hold on to you. If they don't, they'll be happy to see you go. Just don't take it personally.

I've been in many contracts where I have become very valuable to the business and others where if I dropped off the face of the earth, it wouldn't have cased any problem. Such is life.

IamtheWalrus · 12-04-2014 12:47pm

I asked for 475, agreed on 465.

The Corinthian · 14-04-2014 10:40am

IamtheWalrus wrote: »

Bear in mind, this consultancy do nothing more than take a cut, provide me with a laptop and a meal at Xmas.

They also provide you with the client and that is the principle thing they supply you. If you think you can land one directly as a freelancer, there's nothing to stop you doing so - but I'll warn you that it's a lot harder than many expect to do this. As a freelancer, you'll need to spend much of your time selling your services (because there's no 'consultancy' doing so for you) and you can't bill for that time - all presuming you can keep your dance card full.

While it's no longer an issue for you apparently, being able to negotiate a higher rate is not terribly different to negotiating a higher salary in a permanent role. It comes down to two things:

Your skill set. The higher your skill set, the more specialized (and thus more difficult to replace), the greater your experience, will translate to you having greater leverage to demand a higher rate/salary.

Being a key resource. If you're a well regarded (by the client) resource on a project and especially if the client is important will mean that the consultancy will pay greater attention to your being happy and remaining on the project. Clients do terminate contracts when key consultants on them move on.

So while you appear to have sorted your situation out to your present satisfaction, the above may be of use to you in the future.

moycullen14 · 14-04-2014 11:34am

IamtheWalrus wrote: »

I asked for 475, agreed on 465.

Well done, that's great. Are you happy with it?

IamtheWalrus · 14-04-2014 11:44am

moycullen14 wrote: »

Well done, that's great. Are you happy with it?

I can't really complain. Way above what I expected. Hard not to wonder what I would have gotten if I asked for 500!

The Corinthian · 14-04-2014 1:11pm

IamtheWalrus wrote: »

Hard not to wonder what I would have gotten if I asked for 500!

Better off not to. Asking for more may have gotten you more, but it could just as easily made no difference or even resulted in it backfiring on you - raise too high and your opponent may simply choose to see your hand. You did well out of it, IMO.

IamtheWalrus · 14-04-2014 1:25pm

The Corinthian wrote: »

Better off not to. Asking for more may have gotten you more, but it could just as easily made no difference or even resulted in it backfiring on you - raise too high and your opponent may simply choose to see your hand. You did well out of it, IMO.

Agreed considering I would have signed for 400.

Rate increase - how do I achieve it?

Comments