- Self Employed
Every contract has a fixed end date which brings a freelancer to a scenario with two possibilities – one, of getting the contract renewed which happens only if the client loves your work and wants to continue with your services or, second, parting ways for different reasons.
However, in case the former happens, the client would want to extend the contract with you. A contract renewal opens doors for opportunities for better pays and contract terms with successful negotiations. So, if such an opportunity comes, a self-employed person must take full advantage of this.
One must understand that there is a clear difference between a contract renewal and a contract extension. In the former, a completely new agreement is created replacing the old one. It allows self-employed people to negotiate contract terms and pay rates from scratch. It also gives them a chance to renegotiate their position.
However, if there is a contract extension, the terms and conditions of the agreement and pay rates remain same as the original contract except the time period is extended with a new end date. In such a case, the freelancers do not enjoy the opportunity to negotiate anything.
Depending on the work and your relationship with your client, a renewal or an extension can be favourable to you.
If you are faced with a contract renewal opportunity, it’s good to have a strategy in mind. It should not be looked at like a deadline but as a chance to evaluate the terms of the contrast for your benefit. You can also focus on the changes faced during your term since the contract started.
While negotiating a contract, it should include some objectives like:
- Getting a renewal within the first 6 months since the start date of the contract. This creates an impression that you have an ability to maintain good work and relationship with your clients.
- Demand a raise in your pay rates in line with the services you are offering.
- Get yourself out of the IR35 if you are already in it.
Have the right attitude
Have a confident approach while negotiating for a renewal. Don’t be anxious with the deadline as it can turn against you and your contract terms. For a successful contract renewal, you have to remind yourself of the services you offer and think of yourself as a company.
Take time to think
No matter how busy you are, a contract renewal demands your time and attention. Don’t leave everything for the last moment. If your contract does not have terms for renewal. If you are working on a 12 month long project, ideally you should begin the renewal 3 months before the end date.
Be open for options
The client may not accept your terms and conditions if they are not realistic. So, things may not turn out to be according to your expectations. Do your market research and line up with other clients to have more negotiating power with your present client.
Keep a backup of money
A financial buffer is always advantageous in case the contract renewal negotiation fails or gets terminated. It may also happen that the client decides to give the contract to someone with less expectation. For unforeseen events or reasons, a contract can fail anytime which makes it practical to keep a buffer of money to keep you prepared for such events.
Be realistic in your terms
Before negotiating the terms and conditions give a thought of what the client may or may not accept. Whatever terms you propose be it a pay raise or something else, you need a justification for it. To help you decide better, ask yourself these questions.
● Does my client seem keen on having me for a longer time?
● Do I have a good relationship with my client?
● How reliant is my client on my services?
● Am I underpaid compared to the market rate?
● Is my client capable of paying me more?
● Do I have other contracts lined up if this one fails?
● How high is the demand for the services I offer?
● How big competition will I face if I want to look for new contracts?
Pitch your terms to the decision maker
If you are looking for a raise in your pay rate, pitch it to the decision maker, not just any person in the company. It would be futile to talk to someone who doesn’t understand your skills and the value of the services you offer. You would be able to explain better to the decision maker as to why you want a raise rather than someone who might not convey it to the authorised person in the right way.
Keep Your Options Open
Once you know what you want, it’s time to negotiate your contract renewal. Here are the things you’ll need to keep in mind during the renewal process:
Clarify about IR35
Make sure that your working terms and practices fall outside of IR35. When given a choice of working outside of IR35 and a better pay, most people opt for terms that keep them outside the IR35 as it’s financially more profitable than a small hike in your rate.
Contract renewals can often be stressful, complicated and requires a great deal of market research in order to be successful. CoreAdviz helps the self-employed through the entire contract renewal process with expert guidance and professional support to minimise your worry and maximise your profits.