10 Ways to Renegotiate Your Contract and Get a Pay Rise

Toward the end of a contract, a client might want to negotiate a “renewal” or an “extension" to continue your services. If you’re in this position, you already have some experience with negotiating a contract. Renegotiation, however, introduces a few new elements.

You’ll now have a relationship with the client, which often puts you in a better position to argue more favourable terms. However, don’t rely on the idea that simply doing a good job will guarantee better terms. Knowing how to renegotiate a contract is just as important as knowing how to negotiate an initial contract, so read on to learn what you should be doing to get the most out of your renewal.

(1) Look for other contracts

“Dating around” accomplishes two things:

  1. Gives you a better idea of your value and the going market rate, and
  2. Puts you in a better bargaining position if you line up alternative jobs.

If this feels dirty, it shouldn’t (more on actual dirty tactics later). This is business strategy: both your agency and the client will be more amenable to negotiation if they think they might lose you to a higher rate.

(2) Justify a higher rate

When you’re negotiating a contract renewal, there are several justifications for a higher rate:

  • You’re doing more work than you agreed to in your initial contract. Whether the scope of your project has widened, or your client has asked you to pick up additional tasks, this is a strong card to have in your deck.  
  • You’re being paid under the market rate. The market may have surged since you signed your original contract, or maybe you agreed to a lower rate because of your own circumstances. A reasonable client won’t be surprised when you ask for a standard rate.
  • You’ve developed skills that make you more valuable. In many cases, this will be arguable, but you’ll have a better chance if you’ve picked up a skillset that is specific to your client.
  • Your agent is enjoying a generous margin. Agencies want to keep their clients happy; if the client is intent on keeping you around, they might pressure the agent to lower their margin.

(3) Be realistic about your bargaining power

This goes back to knowing the market and being honest about your personal situation. Has the market taken a downturn? Do you have other contracts lined up? If not, do you have enough in savings to justify a gap?

You should have a good grasp on your irreplaceability, as well as your relationship with the client and the agency.

(4) Don’t appear overly keen to renew

Contract renewals look great on your CV, but be cautious about looking like you want it too much. There’s a line between appearing desperate to stay, and appearing arrogant. Learn to straddle this line, because if you come off too keen, you’ll tip your hand to clients and agents; they know you won’t really walk, because it’s clear you want to stay.

Keep your poker face steady by letting them know you’re open to renewal, but that you have options.

(5) Be wary of early contract renewals

If you renew early on, it could inhibit your ability to look elsewhere; few clients will be interested in a contract when you can’t start working for months.

If you’re not happy with the contract terms and have a strong justification for a better rate, avoid agreeing to anything too early. As the end of your contract nears, the client might start readjusting some of the terms in an effort to get you to renew.

(6) Negotiate with the client directly

It’s important to speak with both your agency and the client, but know that your agent will see minimal benefits if you negotiate a higher rate. Rather, they make more money from filling as many new contract positions as they can. Their best interests are in keeping the client happy and reducing the amount of time they spend on less profitable distractions (like renegotiating a contract).

Moreover, agents may not have the same technical knowledge as you or the client. Even if an agent goes to bat for you, can you be sure they’ll deliver as compelling and informed a sales pitch as you would?

(7) Sell yourself

Without going overboard, remind the client of what you’ve accomplished during your contract with them. Persuade them that keeping you on, even at a higher rate, is still a better and more frugal solution than finding someone new.

(8) Stash a healthy reserve

A healthy reserve of savings will float you in between contracts, ensuring that you’re not trapped in a raw deal because of financial need. About six months’ worth of savings will tide you over while you look for a contract that better reflects your value.

(9) Avoid holding your skills for ransom

If a project depends on you or there’s a critical deadline approaching, you’re certainly in a better bargaining position for renegotiation. However, absent any other justification, demanding a higher rate in these contexts can look like exploitation.

Understanding your worth and negotiating better contract terms is smart business, but brute tactics are short-sighted… which segues into our final tip.

(10) Don’t burn bridges

Contract renewals show future clients that you’ve got staying power, so keep that in mind (especially if you’re just starting out).

A contractor’s reputation is key to future contracts and renewals. Don’t compromise yours for a slight pay rise.

If negotiations fall through, do what you reasonably can to keep the client happy. You can negotiate a brief six-week contract extension while they look for a replacement, or even work one week for free if it’s not to your detriment.