When should I review and amend my rate?

AccountingThere are many reasons why self-employment is on the up. Going solo has become the go-to career move across many industry sectors, with the latest figures from the Office for National Statistics (ONS) revealing that the number of self-employed people has increased from 3.3 million to 4.8 million. The self-employed now account for 15.1% of the UK’s labour force, and this figure is on the rise as more and more professionals make the move from employed to self-employed.

One of the perks of being self-employed is an increased earning potential. As a contractor you have the freedom to set your own rate and control your own work schedule. Although setting the right rate in the first place is important, reviewing and amending your rate is just as vital. Read on, to discover the ideal time to review and amend your rate and improve your financial prospects going forward.

When is the right time?

With the New Year and new tax year coming up, what better way to ring in 2019 than with a well-deserved pay rise? Most people, whether employed or self-employed, are nervous about asking for a pay increase. It’s important to recognise when you deserve a raise.

Living costs rise year-on-year and your earnings should too. Many people choose to change their rate in line with the beginning of the new tax year to make the transition smoother for themselves and their clients. In addition to the new tax year and rising living costs, your experience and skill-set may justify a rate increase. Professional development is an integral part of progressing as a contractor, and up-to-date skills and knowledge should be rewarded.

What is a justifiable increase?

Strike the right balance when setting and increasing your rate. If your rate is too low, potential clients may not think you have the experience and knowledge to cater to their requirements. Too high, and you risk being overlooked for opportunities due to you being too expensive. Knowing the current market rate will help you find the perfect middle ground, as Contractor Calculator details:

“Some web sites offer very useful survey results stating what rates certain skills can command in the current market. Whilst these figures provide some good overall guidelines they can be a little limited, since they do not take into account combinations of skills, the level of experience, and market sectors.”

You’ll see from your research that rates vary vastly from industry to industry. Setting and increasing your rate with your specific market rates in mind is a must. Most professionals stick by a percentage increase to boost their rate, with most finding a 10-20% increase justifiable.

How do I break the news to clients?

Whilst new clients who come on-board with your contract business post-raise will be none the wiser, renegotiating contracts you have with existing clients can prove a little trickier. Treading carefully is always advisable. Instead of just sharing the new rate, tell them what they stand to gain as a result. Your clients will want to know they’re still receiving good value for money for the amended rate. This makes the additional service or support, extra resources, turnaround and availability they’ll receive great talking points. In addition, ask if your new raise can work with their budget to show your goodwill towards them.

Although an explanation is good, don’t fall into the trap of beating about the bush. Make sure you are confident when telling your clients why you’re worth every penny.