'IT contractor demand lower than in dotcom bust'

Demand for IT contractors in the troubled financial services sector has fallen faster and to a lower level than in the last major downturn seven years ago.

Greater profit pressures today on all financers explain why they have "less money in the pot" for freelance IT hires than they had in the dotcom bust of 2002.

Explaining his claims, a director of IT recruitment for six UK financial districts said clients are being the most careful yet about who they spend their smaller budgets on.

"Demand for financial contractors is lower today than it was in the downturn of 2001-02," said Paul Elworthy of Hudson, "because the effects of the recession we're in are already greater."

Contractors in most sectors have felt such effects – some accepted daily pay cuts of up to 25%, or were laid off, often before much lower-paid employees, who take longer to dismiss.

Clients are now stepping up their cost-cutting tactics by giving their contractors, who tend to operate via their own limited companies, 'take it or leave it offers' of direct employment.

Contractor group the PCG said, "Our members [report] end-clients offering to take contractors on as employees on the basis that they will not be able to renew…when they expire."

Group policy manager John Kell reflected: "We do wonder, though, quite how long-lived any such jobs will prove to be in the face of headcount reductions in many companies."

This risk of being laid off, kept high thanks to the murky economic climate, appears to have compelled private sector IT contractors to maximise their chances of securing paid work.

General IT recruiters yesterday testified to a project manager survey showing nearly half of candidates with freelance careers started 2009 by searching for permanent jobs.

And of the private sector staff IT recruiter Hays has placed in 2009, almost three quarters said the recession made it more likely they would consider work in the public sector.

"A few years ago the proportion of people willing to consider a public sector job would have been nothing compared to today," said Mark Staniland, director of Hays public services.

"Right now the public sector is becoming increasingly attractive to white-collar professionals, who see it as less lacklustre and a much more challenging and rewarding environment."

While these perks are attractive, the private sector candidates said the public sector's longer contracts were the biggest pull, which more than half said they would take a pay cut to win.

Such contracts are less perturbed by the downturn because IT hiring budgets in the public sector are not usually set yearly. Budgets for 2009, for example, may have been set in late 2007.

"Getting signed up to a 12-month contract instead of a 6-month contract will give candidates a comfort that the work is there for the next year, and the budget is there too," Mr Elworthy said.

"Generally, companies will need the budget first to sign off a contractor for such a duration. So longer term contractors will be reassured [by] knowing the important elements are in place – i.e. there's work to be done and there's money to pay for that work".

IT roles in the public sector now pay similar levels to those in the private, he said, caveating that "the gap is still sizeable" for full-timers, but for contractors "rates are showing parity."

Evidence that the public sector IT workforce, inflating due to private sector contractors migrating, is keen to secure the highest daily rate emerged earlier this month.

A survey by Parity Resources, the public sector-focussed IT group, of contractors placed this month found that financial reward was their second biggest consideration in the recession.

According to the findings, pay was beaten by 1 percentage point by 'length of contract,' categorised in the results as separate to 'job security' – which emerged as the fourth priority.

"IT job hunters are still prioritising finding the right job for their needs, instead of simply taking any job that seems secure and well paid," said Alan Rommel, managing director of Parity Resources.

But Mr Elworthy countered: "Contractors are looking at length [of contract] because it is an indicator of job security. For example, we recently placed a contractor who signed up to a three-year contract. However, contractor job security is only as long as the notice period."

Parity said their evidence of IT contractors valuing contract length and location, the third priority, over job security proved the recession was not forcing them to change job-hunting tactics.

The survey found that fewer full-time candidates than contractors rated 'job security' first, as 'finding the right team' was their top priority – the factor that was the least important to contractors.