IT contractor rates down 40% in public pay freeze

IT contractors in the public sector have had their daily rates depressed by up to 40 per cent since George Osborne announced a crackdown on pay in mid-2010, ContractorUK has learnt.

Rather than just implementing the chancellor’s pay freeze, state-run bodies have cut pay for IT freelancers, with some receiving only six-tenths’ the rate they were on before his pledge.

Trusts, councils and quangos justify the 40% cut by freezing pay for full-time IT staff, in line with Mr Osborne’s call, and then put IT contractors on the equivalent rate for a fixed term.  

“It was unheard of that a contractor would accept something at that level a few years ago,” reflected Christine Christodolou, head of public sector IT for ReThink Recruitment.  

“But unfortunately for them, now many [IT contractors] are having to consider this [lower rate] fixed-term contract as an option, as opposed to being out of work completely.”

Whether the 40% cut is universal isn’t clear, however. Another public sector IT recruiter, Primesourcing, last night said that contractor pay rates “reflect the market rate that they demand.”  

“Contractors will always ‘follow the money’ and they should do - given that they are effectively a commercial entity,” said Primesourcing’s chairman Jeff Brooks.  

“But I have not seen the public sector paying more for their contractors than the private sector, [and actually at present]…public rates are very comparable with private rates.”

Both the IT recruiters agreed that state-run outfits cutting too deeply into their technology workforce, again at the behest of ministers, is providing contractors an opportunity to make up the shortfall.  

“In some cases, public sector bodies have let too many IT contractors go and are now having to increase their usage and that means they experience upward rate pressure when recruiting such workers in a hurry,” Mr Brooks said.

Rethink is seeing the same with NHS-run bodies, specifically in terms of their operations and risk management personnel.

“Many trusts have been hit very hard by redundancies as a lot more staff jumped ship than anyone ever thought, leaving big gaps”, said Ms Christodolou.

“Contractors have cottoned on to this and as such have upped their rates accordingly, knowing they are much more in demand than they have been for a long time.”

The most fertile area for upward rate movement is where directorates need IT-led 'turnaround' specialists who, Rethink’s database shows, are commanding £1,000 a day.

Other temporary IT skills which are firmly in-demand, and therefore likely to attract a premium for candidates at Primesourcing, include Adobe Flex and .Net.

The latter skill, which some say should no longer be subject to offshore pressures, is a staple temporary skill for both public and private sectors, although moving back and forth between the two can be tricky.

“We are not yet seeing contractors vie away from the public sector”, said Mr Brooks, even because of contentious ‘off-payroll’ rules. “Bear in mind that a contract PM who has worked in the public sector for some time cannot easily convince the private sector to take them on.

“This is easier for a developer, of course, but switching backwards and forwards is not straightforward.”

And IT contractors on private contracts aren’t contemplating moving to the public sector, where the intake of temporary IT staff fell sharply last month, even if they could.

“Our contractors have remained on strong rates throughout the year and are involved in long term programmes of work,” said David Ward, a director at private sector IT recruiters SQ Computer Personnel. “This has removed the temptation by the vast majority of our IT contractors to change roles, regardless to which sector the roles on offer might be in.”

Editor's Note: Further Reading - IBM cuts IT contractor pay

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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