Clients launch IT contractor replacement schemes

Corporate hirers stockpiling cash rather than putting it back into their ranks is constricting the flow of openings for higher paid freelance IT workers, despite one recruiter’s IT contractor billings standing at a two-year high.

SQ Computer Personnel, one of three IT contractor job agencies approached by CUK, said yesterday that a higher number of new IT contracts were created in March 2012 than at any other month within the last two years.

It is “too early to tell” if the spike in contracts is part of an ‘upwards trend’ for such freelance IT workers though, particularly as their jobs market remains “ever-competitive in terms of overall volume,” said SQ's founder Bernie Potton.  

Indeed, UK-wide recruitment firm Hudson says that compared with the first three months of 2011, “there has been a drop off in IT contractor billings” in this year’s first quarter.

Sign-off from HR for IT contractors is becoming “increasingly difficult to ascertain”, the firm told CUK this week, “in all but the most niche technology and business critical projects.”

Stuart Rogers, associate director of IT recruitment at Hudson, added: “There has been a noticeable slowdown in the contracting market as clients begin to take a more cautious approach to hiring contractors.

“Clients believe that significant savings can be made by reducing the contractor headcount and replacing with permanent employees.”

ReThink Recruitment is an IT staffing firm whose clients have already given it the go-ahead to replace contract and temporary openings, or absorb them into the permanent workforce - again in pursuit of cost savings.

“There seems to be a larger drive for permanent headcount that suggests companies are trying to reduce overall cost,” Michael Bennett, a director of Rethink explained.

“So some of the major permanent recruitment drives we are running are focussed on contractor replacement...[but] we have not seen any major rate reductions in our clients in the first quarter.”

These ‘contractor replacement’ programmes must partly explain why SQ says more freelance IT candidates are renewing wherever they can, “more willing” to settle for the same contract at renewal, and at the same rate. Some have even agreed to work longer days.

Extending is also a growing priority for IT contractors “because of a lack of new temporary IT assignments [looking likely to] offer an increase in the starting rate” coming onto the market.  

“[All together] this is creating less movement within the IT jobs marketplace,” Mr Potton reflected. “And in turn, less vacancies compared with more the buoyant years.”

Hudson IT agreed: “The market has become more client-driven, with a drop off in demand and an increased number of candidates looking for work, which has led to daily rates continuing to fall.” 

Nevertheless the pendulum of demand swings both ways, Rethink pointed out, and is designed to favour staff who are temporary, contract or a freelance/specialist where the associated permanent skills base is finite.

“In reality, for some candidates, including architects, developers and PMs, there is a huge demand that will mean permanent heads will be harder to secure, so we predict a tipping point later this year when companies have to utilise contractors with certain skills to deliver key projects,” Mr Bennett said.

“So, we are pretty confident that demand will keep holding up well for contractors”.

May 02, 2012