Working as a contractor, it’s only natural your daily rate will get better. As you work, you will get more experience, improve your skills and add more services to your belt. The problem? How do you actually go about increasing your contract rate?
In truth, there are several things to consider, such as why your rate is increasing, who to increase it for and how much to increase it by. In this post, Umbrella Broker explores the key areas of increasing your contractor daily rate.
Evaluating your day rate
The first thing to consider is why exactly your rate is increasing. Like employees with employers, contractors are more valuable to clients when they have more experience. And you’ll gain this naturally as you take on and complete various contract roles. However, there are other factors that can improve your day rate:
- New skills – This could be from a training course, qualification or just something you’ve learnt while working as a contractor.
- Extra services – Maybe you can offer more services to the client now. As an IT contractor, for instance, you might be able to provide 24-hour support or emergency call-outs.
- Higher quality – More skills and experience typically mean better results. If you’re producing noticeably better results than you used to – and better than your competitors can provide – then it’s something you can charge more for.
- More attention – As you work as a contractor, you may begin to take on larger projects rather than multiple small jobs. Exclusivity is important to some clients. If you can provide this on contracts, it will add extra value to your services and your rate.
While it’s not possible to fast-track experience, you can take steps to make yourself more valuable by pursuing some of the above options. Take a training course or offer more services to clients to make yourself more valuable.
Calculating a new day rate
To calculate your increased contract rate, firstly consider the value you’re adding with the factors listed above. How much experience have you built up? Which new skills have you developed? Are there any projects which you’ve delivered outstanding results on?
You should also factor in expenses as you would when calculating your day rate originally. The cost of any equipment, travel or even insurance may have increased over time. Maybe you’ve got someone on-board to assist with your work. This is another important cost to factor in to ensure you’re not losing out.
Finally, do some research to find out what’s a realistic amount to expect. Search recruitment sites to see what similar contractors are charging. Speaking with other contractors or trade bodies can also help you determine what the going rate is.
Like with your original day rate, consider what you want to earn over the course of the year. Let’s say you’re currently earning £50,000 from 200 chargeable days of work – that’s £250 per day. But you want that to increase to £60,000. You would only need to increase your daily rate by £50.
Alternatively, you might be less concerned about annual income and simply want to work fewer days. To earn £50,000 from 150 days, you would need to increase your daily rate by just over £80.
Changing your day rate
For those who work on one contract at a time, your only option is to raise your contract rate for future contracts. In most cases, you will have agreed to the same rate over a set contract length.
However, some other contractors work with several clients at once on a monthly basis. In this case, you can change your daily rate, but you have to decide between two ways of raising it:
- Raise it for all existing clients
- Raise it for new clients only
If you raise it for new clients only, you don’t have to deal with existing clients cutting ties because they can’t afford your new rates, or simply don’t want to pay them. It also helps you decide how much to raise your rates by. You can gauge the reaction of potential clients, essentially.
On the flipside, people who raise their rates for existing clients may lose some clients. However, this isn’t always a bad thing. Clients who are put off by an increase in price clearly don’t understand your worth, after all. Moving forward, you’ll also have more time for new clients at a higher daily rate.
Raising your contract rate for all clients also has the advantage of simplicity. With the same day rate for everyone, there’s no complexity when it comes to invoicing several clients at the end of the month.
Showing your value
If you choose to increase your contracting rate for existing clients, there are certain ways to put a positive spin on the increase. Rather than simply emailing or calling to let clients know your rates will be increasing, ask them how you can improve your service for them when the rate changes.
Another tactic is to explain to clients that you’re becoming more selective but want to continue working with them. Firstly, this helps to make clients feel valued too. It also highlights your exclusivity, with less people having access to your services. If appropriate, you can also let clients know what your competitors are charging. They may not be aware just how good a deal they are getting with you.
Make things easy
Deciding on a daily rate is just one of the many extra tasks for contractors, along with taxes, marketing and of course the work itself. Fortunately, umbrella companies can take most of the admin off your plate, paying your taxes and giving you a regular take-home salary.
But how do you find the best one? That’s where we come in. Comparing umbrella companies through Umbrella Broker could save you hundreds and get you the best service possible. Start comparing today with our fast and simple online tool.
