Contractors : How to negotiate your employment contract extension

Negotiating an extension can be the trickiest part of any contractor’s assignment. It can in some instances be the difference between building a successful career in consultancy – where you develop a real niche – and a jumpy, stop-start, short-lived, jack-of-all-trades one.

But little good advice exists on this topic and many contractors learn simply through their mistakes. Here we outline the key factors in a successful contract negotiation and the main pitfalls to avoid.

Timing your contract extension discussions

First, you need to have an appreciation of the approval process. Normally this comes around four weeks prior to the end of an assignment. Not, for example, halfway through a six-month project. Timing can be a real issue for first-time contractors. By leaving full-time permanent employment you have traded long-term security for freedom and greater earning potential. But this can take time to get used to.

Experienced contractors are much more relaxed towards the end of their assignment. Often they will leave discussions until the last few days, believing that up until then no news is good news.

Your attitude towards the end of the contract

Many inexperienced contractors become anxious as the end date of their assignment draws near. This anxiety can transform itself into angst. Be careful not to let this turn into animosity between you and your client. Don’t try and force their hand.

As a potential renewal date approaches, some contractors have been known to become difficult, insisting on more money and threatening to go elsewhere if their demands are not met.

But this is rarely a successful approach. To manage a contract extension well, you need to behave like a company - which incidentally from a legal standpoint is correct. You are no longer an employee and you are certainly not a client, you are a supplier of services. In other walks of life it would be unusual for a supplier to demand that its client continues with its services.

Your expectations of a contract extension

Many contractors automatically equate a contract extension with a rise in their day rate. This should not always be the case.

If the client wishes to retain your services, don’t increase your day rate simply because you’ve been in post for six months or feel you are central to an ongoing project. This is unprofessional and rarely sits well with the client.

Also, don’t attempt to benchmark yourself against other contractors - either in the organisation or outside. Everyone tends to have different skills and experiences and rates can vary dramatically.

Put simply, while negotiating a contract extension ask for an increase only if you can justify it - for example, if there has been a change in the services you are providing.

Involving your agency in the contract negotiations

And if you do ask for a raise, engage with your agency to mediate on your behalf. This approach has its advantages: your agency will be able to better gauge the receptiveness of your client, and sense whether an increase - asked for or given - could damage your relationship with the company.

You don’t want to create a stand-off. It can leave a bitter taste in the mouth between you and your client and could jeopardise your next extension. A small increase in your day rate may be grudgingly agreed to in order to renew your contract. But it can sometimes leave so much resentment that a future renewal will be out of the question.

This may sound ironic given it relates to temporary engagement, but if you wish to build a successful career as a contractor you have to play the long game. Is a £25 per day increase in your day rate really worth it if it sets you on a path to bitty, short-term contracts and uncompleted projects?

Clients nearly always prefer fewer, longer-term project experience to a list of short-term stints. Constant shifting to new, short-term work and leaving projects incomplete will mean your long-term earnings and reputation could eventually suffer.

Plus, you need to appreciate the value that a current project will add to your CV, skills and experience - in essence, your future marketability.

The right way to negotiate a contract extension

Of course, this is not to say that asking for or indeed getting a day rate increase is out of the question; rather that it needs to be earned rather than demanded. To be successful you have to go about it in the right way and with the right attitude.

If you’re looking for short, pithy advice it should be this: with any one particular client, ask for a rate increase once. Do it diplomatically, respectively and ideally through your agency. Act like a supplier with impeccable customer service. If the answer is no, do not ask again.

But in general if you get your timing, attitude and expectations right you will quickly become successful in managing contract extensions.

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