Citigroup and Barclays cut IT contractor pay

Citigroup and Barclays are London’s latest financial service giants to tell their IT contractors to work for less money or lose their contracts, ContractorUK has learnt.

Following in the footsteps of Morgan Stanley which cut daily IT pay in this year's first quarter, Citi told its IT contractors to bill the new lower rate from April 1st or face termination.

But unlike its American counterpart, which shaved pay by the typical margin of 10%, Citi is initiating a hefty rate cut of 20%; making it the largest IT contractor pay-cutter so far this year.

Bank of America Merrill Lynch in September 2015 is the last time IT contractors have come close to losing 20% of their rate, but even then, furloughs were used to realise such a reduction.

Now, Barclays Capital is using the same technique -- fuse a rate cut with another measure aimed at capping how much billable time IT contractors (who accept the cut) can accrue.

In fact, IT contractors at Barclays' investment arm must both cut rates by 5% and accept any renewal to be capped at three months. Refusal to accept either measure triggers termination.

Many affected IT contractors have jumped before they got pushed, including a long-serving one who claims the May reduction was the eighth rate cut he has suffered since Barclays hired him. 

However, the IT contractor said it was the three-month renewals cap rather than the 5% cut that has prompted a “significant number of contractors” to leave the bank -- “even whole teams”, he said.

An IT contracts lawyer, egos Ltd, points out that shorter contracts can help fend off IR35. But this “very minor” positive is, in this instance, pitted against a two-fold “commercial negative;” the cut and the cap.

Moreover, while it may be possible for IT contractors to negotiate ‘up’ upon renewal, the lawyer said Barclays “could just as easily offer a lesser rate for an extension, without breaking the contract.”

Spokespeople for Barclays Capital and Citigroup were reached yesterday, but were unable to comment by the time ContractorUK went to press.

Editor’s Note: Related Reading –

Contractors’ Questions: What to do if a rate cut looms?

HSBC cuts IT contractor pay rates

Contractors’ Questions: What to do if my rate gets cut?