IT contractors told to reduce their fees or lose their contracts
It has come to light that Citigroup, one of London’s financial services giants has instructed contractors that they must reduce their pay by the hefty figure of 20%. Their American counterpart Morgan Stanley took similar steps earlier this year, imposing a more modest 10% cuts on IT contractors.
Barclays Capital is also following suit and fusing a rate cut with another measure that cuts how much billable time IT contractors can accrue. Where Barclays is concerned the rates have been cut by 5% and they must accept any renewal to be capped at three months, with any refusal triggering an automatic termination.
Many contractors have seen this as the sign they need to jump before they are pushed. In one case a contactor said this is the eighth rate reduction he has suffered since Barclays have hired him. Interestingly though it has been the three month renewals rather than the rate cut that has prompted whole teams to leave.
IT contract lawyers have pointed out that the one, very minor, silver lining is that shorter contracts may help to fend off IR35, but when dealing with a two-fold commercial negative, the cut and the cap, this barely registers.
Now it may be possible for IT contactors to negotiate ‘up’ their contract upon renewal – however Barclays and other companies contemplating such cuts could just as easily offer a lesser rate without breaking the contract.