Contract Rate Reduction
We received this in our Feedback mail.
Contractor on Rate Reduction
My client has recently told all contractors to take an across-the-board contract rate reduction of 10%. There’s to be no argument or discussion over it. Those that don’t accept it will get whatever notice it states in their contracts.
This is the second time that they have done this as I had to take a 10% rate reduction last September as well.
There’s a temptation to jack it in, and look for a job elsewhere. What should I do?
UK Contractor Reply
It is ridiculous that companies are making a contract rate reduction now. The time to do this is at contract renewal time. This is unethical.
If, during boom times, contractors came en masse to tell a client that they want an across the board increase of 10% or they were all walking out in the middle of the project, despite the fact that they were in the middle of their contracts, then the company would be absolutely furious and call them all sorts of names.
They would call them shysters who were attempting to hold the company to ransom, and they would be right.
So if they wouldn’t like it themselves, why would they do it to others? That’s the hard realities of business, they’ll say.
Well one of the hard realities of business is that loyalty has to be earned. You don’t give it free.
You shouldn’t do anything so rash as to pack your contract in due to this rate reduction.
No, get smart!
Take the rate reduction, but use the time to start looking for another contract. You might as well be paid during the time that you are doing so.
Advise the other contractors in your office to do so too.
What the company might find is that they’ve now got cheaper contractors, due to the rate reduction, but their turnover in them has increased. As each contractor dumps the client, they take with them business and systems knowledge of the company which their replacement wont have.
The company may well find that, although they seem to have cut the costs of the project, they haven’t really done so, as productivity will go down. This means that there is a greater risk of the project running late and over budget, and not delivering what the customer wants, whilst bouncing in and out of test.
They are taking a huge gamble here that everyone will be docile and take the rate reduction.
Be seemingly docile – but make your exit plans, and start to implement them.
This company doesn’t deserve your loyalty!