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Several City banks have threatened to terminate hundreds of IT contractors if they refuse to accept hefty pay cuts. Banks including Deutsche Bank, Barclays Capital, BNP Paribas and Merrill Lynch have told their IT contractors to work for up to 11% less pay or lose their jobs. A spokesperson for Merrill Lynch blamed the policy on the “difficult environment” in the financial markets, saying it had forced the bank to “reduce costs across the firm.” “If you chose not to participate,” the bank told its agent, “your resources will be terminated in accordance with the contractual notice provisions in your Consultancy Agreement with Merrill Lynch.” The fallout from the credit crisis has also forced Royal Bank of Scotland, which owns ABN Amro, to review its entire cost base, including contractors, across its technology division. In an internal memo sent last week, management from both banks invited IT contractors to leave immediately or accept a “blanket 10%” pay cut from next month. A group spokesperson told CUK that details of contractual agreements with IT staff are confidential and declined to comment when rates would return to normal. However the spokesperson pointed out that RBS always pays its IT staff “in line with [temporary jobs] market,” in a veiled allusion to the host of other banks now cutting pay. Internally, RBS told IT contractors that it acknowledges the pay ultimatum “financially impacts” them yet, in the same memo, said their “commitment and effort to RBS is greatly valued.” The raft of ‘take it or leave it’ pay cuts is no surprise to Rajeena Brar, an analyst at Pierre Audoin Consultants, which warned CUK of tougher times for financial IT contractors in April. “Under financial pressure, banks will find it easy to cut IT contract staff costs as short-term projects like systems integration/development are put on hold or taken back in-house,” the analyst said yesterday. “Many of the ‘less priority’ projects are being placed at the back of the agenda, while banks focus on reducing costs where possible to reduce the negative impact of the credit crisis and poorer economic conditions.” Some affected IT contractors say the banks are imposing on them the lesser of two evils; as the choice between a pay cut and termination is better than outright termination. Many have accepted the cuts but anecdotal evidence suggests they will use less pay as an excuse to under-perform or search for a contract less exposed to macro economic conditions. One IT contractor blasted: “RBS are…terminating all contracts and offering replacements at a reduced rate of 10%. Take it or leave it. “This is truly appalling, particularly given that I was lured into accepting a contract with them after much negotiation over the rate.” Analysts at PAC said they expect growth in demand for IT project services, which includes IT contractors, to fall by 1.8 per cent this year. "IT contractors are accepting that they are better off staying with their existing client," PAC said, "as they face the high risk of being unemployed for an unknown amount of time." Jun 11, 2008 Email this article Printer friendly page Previous Page
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