Contract Rate Reduction – What to do when asked to take one

Contract Rate Reduction
Contract Rate Reduction

Contract Rate Reduction Demand

We received this in our Feedback mail about a contract rate reduction demand from a client to all their contractors.

My client has recently told all contractors to take an across-the-board rate reduction of 15%. 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% cut last September as well.

I‘m tempted to jack it in, and look for a job elsewhere. What should I do?

Cut Contractor Rates
Cut Contractor Rates

ITContractor Reply

It is ridiculous that companies are doing this. The time to do this is when contracts are at renewal time. This is unethical.

If, during boom times, contractors were to come en masse and tell them that they wanted an across the board increase of 15% 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.

Hard Reality of Business

Well one of the hard realities of business is that you have to earn loyalty. You don’t get it free.

Contract Rate Cut
Contract Rate Cut by Client

You shouldn‘t do anything so rash as to pack your contract in. If you do, in this market, you might find that you are out of work for a long, long spell, with no income coming in.

No, get smart!

Take the pay cut, but use the time to start looking for another contract. You might as well be earning during the time that you are doing so.

Advise the other contractors in your office to do so too.

Cheaper Contractors

What the company might find is that they‘ve now got cheaper contractors, but their turnover in them has increased, and as each contractor leaves, they take with them business and systems knowledge of the company which their replacement won‘t 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, meaning 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 over this contract rate reduction.

Be seemingly docile – but make your exit plans, and start to implement them.

This company don‘t deserve your loyalty!