Lloyds cuts IT contractor pay rates

Lloyds TSB, the part nationalised British bank, has downgraded the pay of its IT contractors, telling them they will work for up to 15 per cent less or face termination.



The bank has agreed with its recruiters that all IT freelancers will drop their daily rate by 10 per cent, or more, if they wish to keep their contract, under its plan to save billions.



A spokeswoman for the bank said: "Lloyds Banking Group has announced some changes to the rates for contractors within its group IT division."



The new agreements, which contractors were only given the weekend to consider, represent the second time in 12 months that Lloyds has cut IT contractor pay by 10 per cent.



The bank's latest ultimatum is different, however, in that it went to IT contractors across all of its units, and because it follows a string of similar ones made by its rivals.



Given that they are also in place at non-financial clients, and for often being used to avoid layoffs, the pay ultimatums have become ubiquitous and the 'lesser evil' for workers.



An IT contractor at Lloyds reflected: "[It's] 'put up and shut up or get out', so I'm 'putting up' and will be rushing back my acceptance by the deadline to secure the position".



The Lloyds spokeswoman explained: "As with any major organisation, we constantly monitor contractor rates, to ensure they are in line with the market and our competitors - and in recent months the market rates for IT contractors have decreased.



"This means that from July 18 we will be reducing rates for some of our existing contractors by up to 15 per cent, bringing us into line with many other organisations across the industry ."



IT workers at Lloyds have been braced for changes since September last year, when the bank announced a technology consolidation plan as part of its merger with HBOS.



Alongside branch closures, the consolidation of IT systems, in three main areas, should deliver annual savings before tax of £1.5bn by the end of 2011.



The bank said it would consolidate datacentres and networks across the two outfits, build an integrated IT platform for retail banking, and build a single system for wholesale banking.



The process of swallowing HBOS has already resulted in 4,500 job losses at the enlarged banking group, representing just a small fraction of the total number of layoffs unions expect it to make.



"Lloyds, RBS and other banks will be still making thousands of redundancies [over the coming months]," said Alexandra Kelly, the director of Powerchex, an IT staff screening firm for the City.



"My advice to IT contractors is to hang on to their jobs because there will be plenty of others waiting to do them, [and] for less money."



She claimed bank bosses were privately saying that, despite the layoffs, their output has not seriously suffered, indicating that their ranks were more populated than they had realised.



As if to evidence her view, Barclays yesterday announced it would shut down its two centres in Liverpool and eliminate the nearly 200 jobs within, prompting attacks from union Unite.



The news coincides with a survey of 700 employers showing that two-thirds have frozen recruitment partly or entirely, while one in three have cut their use of agency workers.



The CBI/ Harvey Nash survey also found that a quarter expected to transfer work overseas – a cost-cutting move led by the IT sector, where 54% have either exported jobs or intend to.



And more than half of the responding companies, who employed a total of more than 3m people, said they planned to implement a freeze on wages in their approaching pay round.



Reflecting on the current climate, Ms Kelly advised: "If you have a job, hang on to it for dear life until the storm passes. Employers are not in the mood to negotiate with contractors on pay."