Banks give IT contractors pay ultimatum

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Global economic woes are set to hit the IT sector, with news that UK contractors working for some of the world’s leading banks may be threatened with either pay cuts or the sack.

Online reports have suggested that banks including The Royal Bank of Scotland (RBS) , Merrill Lynch, Deutsche Bank and BNP Paribas have all reviewed their use of IT contractors in light of the current economic turmoil.

According to a leaked email from Merrill Lynch to London-based recruitment firms, the bank would terminate contracts on contractors if they failed to comply with a wage decrease.

The emailed stated: “Merrill Lynch has recently undertaken cost cutting initiatives throughout the firm. As such, Merrill Lynch Senior Management is requiring an 11 per cent pay rate cut for technology contract workers in RAQS, effective 21st June 2008...If you chose not to participate, your resources will be terminated in accordance with the contractual notice provisions in your Consultancy Agreement with Merrill Lynch.”

Although Merrill Lynch did not confirm the authenticity of the email by the time of publication, but they did confirm that they had indeed asked their IT contractor suppliers to cut rates by 11 per cent.

However, they also stated that they were dealing with agencies and not individuals, and that it was not a matter of costing contractors their jobs.

A spokesperson for Merrill Lynch said: “This is part of a cost reduction programme being applied across the whole firm as a result of the difficult market conditions.”

Similarly, a spokesperson for the RBS said that they were in talks with contractors, but would not disclose any further details regarding pay decreases.

“Details of contractual agreements with staff and suppliers are, of course, confidential and we never comment on such matters," the spokesperson said.

“However, we regularly review all aspects of our cost base to ensure we are in line with the market."

BNP Paribas and Deutsche Bank were approached by IT PRO about their stance towards IT contractors, but declined to comment.

Chairman of Prime Sourcing and chairman of IT & Comms Sector Group with the Recruitment and Employment Confederation (REC) Jeff Brooks said that given the current economic climate he was not surprised by the conduct of some banks and said this gave contractors an opportunity to negotiate their contracts.

“This is not usual. The finance sector is struggling. But what I’m finding is that the rates are holding up for skills that are in demand. There generally isn’t a mood to reduce rates for skills in demand," he said.

“Contractors should ask for more security if they’re asked to agree to these rates. If they ask for one year contracts they would also include a three-month break clause so that they’re covered.”

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