Barclays Capital slashes contractor rates by 10%
IT workers get credit crunched
Barclays Capital is forcing its IT contractors to choose between a 10 per cent pay cut or a quick exit from the company.
The decision, presumably an alternative to cutting jobs as the bank negotiates the current financial crisis, has sparked outrage amongst contract staff, who have to signal their "acceptance" of the wage cut this month.
The forced pay cuts will then come into force from next month and staff can either accept them or work out their notice. Anonymous Barclays contractors told us they would take the cut but had already starting looking for new jobs.
Agencies we spoke to, which all requested anonymity, said they were not surprised at the move and that other city banks were cutting rates and the number of contractors employed.
But Barclays Capital seems to making larger cuts than other institutions and several recruitment specialists criticised the way the bank has forced the changes down contractors' throats.
One said: "This is exactly the worst thing to do. Sack a whole person, and choose that person, rather than annoy everyone and risk losing someone from a profitable part of the business." Nevertheless, other banks are expected to follow BarCap's lead.
Dominic Connor, director at P&D Quantitative Recruitment, said: "This is the sort of sloppy management that got BarCap into this mess in the first place. The sums involved are small but the inevitable but random loss of contract staff is just to make some beancounter look good on a report. Ten per cent across the board is simple minded and bluntly inefficient way to cut costs."
Barclays Capital declined to comment on this story.
Citigroup is today expected to announce sizeable job losses. At an analysts meeting the company pledged a 20 per cent cut in its $60bn annual budget. The bank is resisting calls for it to be split up. according to the FT but will sell off non-core business, cut jobs and radically reorganise its IT system.
Credit checking agency Experian released research yesterday predicting the loss of 10, 000 City jobs over the next three years. Experian reckons 40, 000 UK jobs in banking, finance and insurance will disappear between 2008 and 2011.®
Red Bren - Civil Servant or political nonce?
I'm not a contractor but have been before, both out of necessity and choice.
Quote = "Contractors already earn a fortune in comparison with permanent staff ".
Answer = Clearly you are incapable of setting up a simple spreadsheet to quantitatively evaluate what a contractor gets against a comparable permie, though the keyword in your statement may be 'earn' as opposed to simply 'be paid'.
Quote = "don't have to pay taxes through PAYE".
Answer = Yes, they do. Just how ignorant are you? Wait, that's an answer with no end.
Quote = "It's why people go contracting".
Answer = No, people go contracting for a variety of reasons. You appear to just be of limited intelligence, imagination, experience, or some combination thereof.
Quote = "I recall when IR35 came in, contractors were discussing how to avoid having to pay their fair share of tax".
Answer = If you are a permanent IT employee, name the IT technical courses and qualifications you put yourself through paying out of your own pocket. How many is that? None, and that is just one of the anomalies of your 'fair' IR35 regulation.
If you think contracting is so profitable then why aren't you contracting? Some risk involved if you're not up to the job, eh? I am not a contractor, but neither am I a bitter, envious, no-talented scared little twat. If contractors can't or don't deliver they can easily be canned, so just the fact of their continued existence proves their necessity to business.
Contracting - some of us ended up doing it after being made redundant elsewhere. The days of picking up more money than the permies are pretty much over, once you look at the whole package.
Example, contracted via an agency to a large broadcasting company, the on site admin (dumb bint) decided to tell everyone what the agency was billing for my services - I saw a good £6 a hour less than that, but was already getting funny looks - Contractors were severly limited in terms of access rights to do any meaningful work on AD etc. hence they all thought I was getting paid a damn sight more than I was and yet couldn't do half the duties my nominal role demanded....
Then there was the paternity leave, or lack of it. The umbella company were regardedf as my employer for tax puroposes, but would not pay for pat leave, the client was astonished when I walked back onto site after a days off as I couldn't afford to take any more unpaid time away.
Finally, IR35, there are/were loopholes that allowed you to offset stuff against tax, but when we did a round table at the end of contract it transpired that myself and one other lady still had the worst take home pay of anyone in the department.
In my current place I'm fortunate enough to be permy, and in a decent position, but the number of young kids coming in out of uni/1st job elsewhere who are on contract and don't even know what the going rate truly staggers me. I have personally seen two guys, same skillset, agency billing at same rate, being paid differing rate (by almost £4ph!)
AC, cos no doubt some bugger in here will clock this and squeal...
Just a quick clarification of your point 2 re. IR35. You don't just have to pay NI: you have to pay Employer's and Employee's NI. Yes, that's right. To add insult to injury they classify you as an employee for tax purposes and then make you pay the Employer's NI as though you were your own employer too. How sick is that? Of course, IR35 is now a voluntary tax only paid by the kind of contractor who's happy to work free overtime for a daily and as such perhaps it isn't so unfair after all.
IR35 and BarCap: just say no. You know it makes sense.
My reply to BarCap would be to shove it
It's not in my business case to subsidise the profits of multi-billion dollar investment banks. They are taking the pi$$. If they can't afford to pay the rates they've been paying then they'll just have to find cheaper contractors/employees elsewhere which I believe they are already doing. When was the last time you told a plumber or a builder that you're sorry but your dividends have gone down and you'll just have to cut their invoice by 10%? I've never met a plumber in London prepared to negotiate on their rates - they'd just put the phone down and you'd drown in your own effluent. In order to send work to Singapore they need the cooperation of the indigenous UK workforce to train up the cheapy folk. Answer: either don't do it or don't do it well. When I was asked to hand over a project to the Indians I made it clear it wasn't my job to teach the Indians to progamme. If they couldn't hack it tough. Funnily enough, they couldn't hack it and the project was canned.
The main problem with contracting in the City is that you are playing with sharks. It's an enormous racket between the banks and the recruitment agencies and consultancies(many of which are owned by current or former IT directors of investment banks funnily enough or their mates). The Office of Fair Trading really ought to be taking a look at it. They don't give a $hit if they get substandard work from some halfwit so long as they're cheap. If you won't work for the rates they tell you your CV doesn't go forward to the client so you don't even get the opportunity to show them why you're worth the money you're asking. Too many, usually young and inexperienced, contractors are prepared to work their nuts off doing unpaid overtime for a mediocre daily rate. That's what's ruined the contract IT market in the City: anti-competitve practices by the investment banks to artificially control the market which is illegal. I used to work in the City but rates have barely moved in the last 7 years, i.e. contractors have been working harder for less money. Life's too short. I'm happy to put in a good day's work for a fair hourly rate and more than happy to do 12 hour days so long as I'm paid for every tedious one of them. I'm not going to be obliged to work extra unpaid hours just because their project's a mess and the deadlines were non-sensical anyway.
I don't suppose anything's going to change because the average contractor isn't going to wise up to their leverage potential. Sod the daily rates, I want an hourly rate because I didn't go into business for the amount I earned not to be related to the amount of time I worked. That's what permies are for.
It's time for contractors to grow a pair of balls and tell the banks to shove it. Trust me, they need you a hell of a lot more than you need them(or at least that should be the case). So JFDI, kick them where it hurts and there'll be no more nonsense about daily rates, non-IR35 friendly contracts, offshoring, rate cuts and forced holidays.
As for the jealous little pussy-whipped contractor-hating permies who imagine that contractors don't pay PAYE and NI, why don't you just FOAD? Ok? You are merely advertising your inadequacy and sub-optimal IQ to a global audience and making your fellow permies an even bigger laughing stock because no matter how badly contractors get screwed by unscrupulous employers like BarCap the permies are getting seriously reamed and they seem to enjoy it - wonder why.
Contractors exist for a reason
When the sh*t hits the fan, it lands on the contractors. Banks like to have 15% contractors (although many have much more which they don't like), so that when times are bad they can instantly save 15% by chopping them (or the like).
If they were 100% permies they couldn't do this without all sorts of strife.
And thats why contractors get paid more, as it's a 'risky' job.