IT contractors are leaving Barclays following the bank’s decision to unilaterally impose a 10% rate cut, sources have confirmed to ContractorCalculator. Some departments have already been cleared of IT contractors, and the rate cuts appear to be accelerating the process in others.
Contractors have been told to accept the rate or leave by Friday 4 April 2014 if they don’t agree, although some have taken the bank’s move as a breach of contract and have quickly started to secure new roles. Fortunately, these are not hard to come by as the City of London’s IT contractor market has been hotting up in recent months.
But for Barclays, its move is likely to have a damaging effect. “This is exactly the wrong time in the IT contracting market cycle for any bank to be taking such a risk with its IT,” warns ContractorCalculator CEO Dave Chaplin. “The best and most productive contractors are easily finding new contracts in such a buoyant market, leaving less qualified contractors and new starts to maintain Barclays’ IT systems and pick up existing projects.
“And even those highly experienced contractors who may decide to stay are hardly going to be highly motivated now, so the rate cutting exercise will backfire across the board,” Chaplin continues. “In my experience of managing teams of IT contractors through similar rate-cutting exercises in the past, the client can suffer from lost productivity as high as 10%, with the resulting impact on budgets and schedules.”
Chaplin highlights that contractors don’t have to accept a forced rate reduction mid-contract, and can take steps to avoid having their rates cut. This has often been successfully done by responding to the client with a reasoned argument in an anti-rate reduction letter outlining why they should be kept on at their existing rates.
“Financial sector client contracts are typically structured so that the bank can benefit from a termination period if the contractor wishes to move on, but contractors can be terminated immediately,” continues Chaplin. “That may leave Barclays’ contractors with few options.”
These rate-cutting measures will apply to both UK and US-based contractors, and come hard on the heels of Barclays’ decision to shed 12,000 jobs worldwide, including 7,000 in the UK.
Chaplin concludes: “IT contractors underpin the ability of financial sector clients to maintain service delivery and develop new products and services. Other financial institutions are only likely to gain by hiring talented IT contractors forced out as a result of Barclays’ rate cuts.”