Contractor rates dip for bottom line win

Corporate Australia is going through one of its periodic re-balancing acts between contract and permanent IT staff.

Both groups have been under pressure in a complicated scenario, which has seen contract rates dip and permanent staff numbers tighten.

But after months of severe gloom and doom, there may be a hint of light on the horizon for both permanent and contract IT professionals.

General demand for contractors from the corporate sector has "really dropped" in recent times, says Angela Martin, general manager of recruitment agency Paxus Queensland.

"I wouldn't say there is a [surplus] of contractors on the market but the rates they can charge have been driven down.

"What was a valid rate six months ago has dropped 25 per cent. People who were previously getting $200 an hour aren't even sniffing $150 now."

Paradoxically, higher-priced contractors with skills that play into corporate strategic IT planning have been weathering the storm best, she says.

"Companies have been pulling in their horns and cutting overheads by minimising permanent staff.

"At the same time, they are taking on the more expensive contractors to help them with their strategies to go forward.

"They still need to get things done and move projects along, so even though they are downsizing permanent staff with their right hand, with their left they are taking on contractors."

However the general dip in rates means they are getting those contractors at bargain prices, which produces a win-win situation for the corporate bottom line.

Whether all this adds up to a net loss for the IT professional community is a cloudy question.

However, Martin is now sensing a mood shift among her corporate clients.

"At a senior level, people are cautiously optimistic about the future. The mass exodus of IT professionals of a few months ago has slowed, the gloom and doom has diminished and people are looking more on the positive side."

There are about 4000 contractors and 12,000 permanently employed IT professionals in the membership ranks of the Australian Computer Society.

The contractor figure is composed of a hard core of career contractors and another component that swings back and forth between contract and permanent jobs, says ACS chief executive Dennis Furini.

Central to the rationale for companies using contractors is the flexibility to rapidly increase or decrease the labour components of their cost structure, plus fast access to special skills.

"Companies that have previously relied heavily on contractors are facing cost pressures, but there are still those out there who are experiencing demand for systems. They are more inclined to employ contractors than increase permanent staff count, particularly in the case of special skills for which they won't have a demand once a new system is up and running.

On the other side of the ledger, when it comes to control and management issues, companies feel more comfortable having key staff who are permanent employees.

Furini agrees the broad base of contract rates has fallen and that economic conditions have taken their toll on permanent workers as well.

"Anecdotally, I have come across a lot of IT professionals out of work. But they tend to be those with older skill sets."

It highlights the need for IT professionals in both camps to take control of their own careers and update their skills sets in line with market demands, he said.

One critic of the "slash and burn" culture of the 1990s in which companies decided the quickest way to cut costs was to cut staff is Susanne Moore, managing director of Sydney consultant Synergy Management Solutions.

She believes the pendulum has swung away from contractors toward permanent staff in the past six to 12 months.

But she argues that much of the criticism levelled against the cost of contract labour really should be aimed at loose management on the part of employers.

Many contractors are booked with unclear terms of reference, which makes it difficult to accurately measure their cost performance, Moore says.

Also counter-productive is treating them as a commodity and with less respect than permanent staff enjoy.

But Moore believes the needle will swing back toward contract staff over the next six months, because of the huge numbers of staff who have been rationalised, especially in the telco sector.

"A lot of organisations will be under pressure to scale back up again in the next six months. And the fastest way to get those skills back is to bring in contractors."

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