Leeds council cuts contractor rates
Recession really is opportunity
Posted in Management, 30th March 2009 10:02 GMT
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Leeds City Council is telling all its IT contractors to take a ten per cent pay cut.
This has become standard practice for many private companies, especially hard-up banks, but is less common in the public sector.
The contractor who contacted us felt the council was taking advantage of the economic downturn to force cuts on its staff but the council insists it is feeling the pinch too.
A Leeds City Council spokeswoman said: “The council operates a framework contract for the supply of ad-hoc ICT contractors to meet peaks in workload demand, or where a short term need for specialist skills is required to supplement its internal workforce.
“Because of current budget pressures all suppliers on the framework have been asked to provide a ten per cent reduction on the rates paid for existing and future ICT contractors. The suppliers concerned have indicated that this is typical of what is happening across the ICT sector at this time.”
The council is under pressure due to lower government grants and is suffering from the recession. The spokeswoman explained: "Revenue from leisure centres and charges for planning applications have dropped significantly in recent months as the economy began to decline.
"The current climate is also seriously affecting the council’s ability to generate money from the sale of surplus land and buildings which in the past has allowed it to invest heavily in services."
Banks, oil companies and outsourcers have all forced similar deals on their contractors. ®
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COMMENTS
Cut productivity
Of course, you could always cut your productivity by 10%.
Paris, 'cause she has a nice body and no brains. Who cares what she charges per hour.
Somewhat missed the point...
Rates and work return are not relevant. Nobody came in and took away assigned budget. By all means renegotiate at renewal time (both parties often do) and offer a lower rate. Then the decision remains with the contractor.
The point I make is not about how much someone gets paid but more about the commitment to funds thy they make on an agreed rate.
Nobody, permies or contractors like pay cuts - you shouldn't need them mid term if you managed your budget correctly...
Right to minimum wage
No, contractors as owner-managed businesses don't have a right to anything, let alone minimum wage. Same deal as a corner shopkeeper. You can only take out of the business whatever profit is left over after you deduct operational expenses. There is no one else to fund a 'minimum wage'. If you are not able to attract and retain paying customers, you are entitled to not eat and fall behind on your mortgage. Or get a 'proper job'. Or do something else that you can succeed at. Conversely, in the boom times, you are entitled to take large chunks of money out of that business. That's the inherent risk of any business venture.
The other posters are right. Because contracting is a form of running an owner-managed business, you compete in a free market. You cannot escape that fact. In some climates, you actively take advantage of that, when supply/demand is more in favour of the supplier. That would not be right now.
It is actually technically incorrect to say 'The customer has imposed a ten percent pay cut' because
1. It is not 'pay' like wages, it is the payment of a Time and Materials format invoice for services by the contracting company, the same kind as is put in by the cleaning company and the vending machine maintenance company. So a 'pay cut' cannot happen, the council have no idea what the contracting company pays its operatives, they only know their contribution is to its turnover.
2. Similarly, they cannot 'impose' as they have no power to do so. What they can - and rightly have done - is say 'as customers, we are no longer prepared to buy services for X pounds, we will shop around and go with cheaper alternative suppliers'. As other posters correctly say, welcome to free market business. The value of your offering goes down as well as up. The idea of 'pay cut' is better expressed as the contracting company volunteering, albeit reluctantly, a discount to its customer in a bid to retain custom in a tough market. This is no different to any other seller of anything, be it cars, fruit and veg, hifi or what have you. The company can always choose to NOT offer such a discount if they so choose. This would depend on how valued that customer is to them.
Eventually, your offering value falls to zero, as whatever offering you provide no longer meets any business needs. For IT contractors in particular, this equates to outdated skill sets - or just being a grumpy old beggar who is a pain to have around.
Two things.
"The current climate is also seriously affecting the council’s ability to generate money from the sale of surplus land and buildings which in the past has allowed it to invest heavily in services."
so basically follow the gordon brown spending model, burn your assets on feckless spending
secondly how much IT spending does a local council need? that a 10% cut will make a huge difference
Welll mistakes do happen
and unmotivated workers tend to be more prone to mistakes, I can see the payroll system for council managers being particularly unloved. Still that could actually save the Council a lot of money, I am sure managers could work for nothing, it is not like they actually do anything.
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