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​How should you manage a contractor who wants a rate increase?

SAP contractors are a nomadic lot. They go where the work takes them, coming and going as their assignments dictate. And because they are generally highly skilled and their services in high demand, they have the luxury of going where the money is.

That said, contractors know what side their bread is buttered. They know that if they’re loyal to their employers they’ll be more likely to be rewarded with another project. Besides, they have a reputation to maintain; word spreads quickly and there’s nothing like a disgruntled employer to hinder the job prospects of a contractor!

Questions to think about

The first question to ask is; will your budget accommodate a rate increase for your contractor? Because there may be occasions when the contractor actually deserves one – or at the very least it should be seriously considered.

• Has the contractor has been with you for twelve months or longer?

• Has the contractor performed well and become important part of the team?

• Could you lose the contractor to a more favourable opportunity?

• Has the contractor’s role changed?

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Communicate!

The best way to manage expectations is to be clear and frank up front. Explain at the point of engagement that there is no room in the budget for a rate increase (if indeed that is the case).

Once the contract is underway, be aware of the end date and monitor the contractor’s performance. If they’re adding real value you can offer a slight rate increase as a gesture of goodwill, and to let him know that you value his work.

Keep an eye on what the contractor is doing in relation to their position description. They may try to expand their role – or they may need to – which should only be allowed or encouraged if you can afford to pay them accordingly.

You’ll also need to consider the relationship. Is he contracting to you directly via his own Limited Company, or through a recruitment agency? If it’s the latter then the agency will need to be the conduit between you and the contractor during any rate increase discussions, to ensure the correct amount of Payroll Tax is taken into account.

In summary…

• Be clear about the role, responsibilities and remuneration at the start of the contract.

• Be aware of the contractor’s position description. Is the role the same? Or has it developed into something more involved and with more responsibility?

• It should be obvious, but make sure the business approves of any rate increases before discussing the possibility with the contractor. Nobody likes getting their hopes dashed!

• Keep an eye on the timeline and make sure you have the budget if you need to extend a contract for 6-12 months.

• Finally – allow us to do the negotiating for you. After all, it’s what we’re here for!

If you’re considering a rate review for a particular contractor, consider the overall value they bring to your project, this may be reason enough to consider a rate increase to keep them loyal to your company before a competitor snaps them up!