IT contractors have recently received ‘take it or leave it’ rate cuts at the hands of some major businesses, reports suggest.

Wednesday 10 April 2013

Demand for IT contractors is undeniably high and huge numbers of businesses are turning to them for their specialist skills. Just yesterday, the Recruitment and Employment Confederation published its monthly Report on Jobs in which IT and computing staff were the most highly sought after among temporary and contract workers. The report even suggested that contractors had seen their highest pay increase for a year.

That said, it appears that the expertise of IT contractors is not appreciated to the same extent by every firm. Reports suggest that some contractors have received surprising ‘take it or leave it’ rate cuts from major companies over the past few months.

According to Contractor UK, one of the recent culprits was IT and business services consultancy CapGemini. Towards the end of last year, it told all of its IT contractors to either incorporate a rate cut of five per cent in every invoice as of January, or to prepare for their contract to be terminated.

Soon afterwards, Barclays told contractors working in four divisions across their US and UK operations to reduce their bills by as much as a tenth from February 2013 in order to avoid losing their contracts.

Most recently, Contractor UK says that business technologists Atos sent out an email to all its temporary IT staff the day before the beginning of the new tax year at the weekend. The message informed them that they had just one week to decide whether to slash their invoices by a tenth or seek contracts elsewhere.

This is certainly not the first time contractors have found themselves in this position. Last autumn, IBM’s Global Technology Services division told contractors to cut their rates by ten per cent unless they were willing to lose their contracts. At the time, IBM declined to comment on the telling basis that the staff involved “were not IBM employees”, Contractor UK claimed.

In March last year, HP’s Enterprise Security Services division also reportedly issued an ultimatum to its contract workers, making it clear that they expected to see a five per cent fall in contractors’ billing from the beginning of April.

Even before that, the tradition appears to stretch back further. October 2011 saw a number of IT contractors in the financial services industry receive similar demands from a number of major banks as the extent of their crisis became clear.

Nomura, Royal Bank of Scotland and UBS were among some of the institutions enforcing price cuts of up to a tenth upon contractors’ services.

Contractor website Egos keeps a log of all such instances which are submitted by affected workers, and currently lists 31 separate reports of similar practices stretching back as far as 2001. So in this period of economic uncertainty, do contractors need to worry?

Although such behaviour from major companies leaves contractors in a tough position, it is still relatively rare, and in a period of unprecedented demand for specialist IT contractor skills, it is likely that better opportunities will be out there for the taking.

Of course, when the economy begins to recover properly and business conditions pick up, businesses will have to adapt their contractor rates accordingly - and it will be for freelance workers to decide whether or not some companies will benefit from their services.

By Victoria McDonnell

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