Barclays pay cuts - cute or callous?

What are we to make of the news that Barclays Bank is slashing contractors' rates by 20% in an effort to cut costs across its IT...

What are we to make of the news that Barclays Bank is slashing contractors' rates by 20% in an effort to cut costs across its IT department? Should this be viewed as a ruthless but brave attempt to rein in costs? Or is it a flawed piece of short-termism that could backfire badly?

If you are one of the contractors standing to lose 20p in every pound earned working for the high street bank, you are bound to take a dim view, despite Barclays' reassurances that there will be no job losses among its temporary workforce.

But these are trying times for IT budget holders. Every penny of expenditure needs to be carefully scrutinised, and whatever the ethics of this summary rate cut, there is no denying that the IT jobs arena is, for the moment at least, a buyer's market. Put simply, Barclays did what it did because it could.

Clearly the move was primarily financially motivated. But one wonders whether this is also a cute ploy to motivate permanent members of the team.

The latest SSP/Computer Weekly Quarterly Survey of Appointments Data and Trends revealed that IT professionals' salaries in the first quarter of 2002 had risen just 1.2% on the equivalent quarter in 2001. With salaries progressing so sluggishly, permanent IT professionals must find the sight of contractors breezing in on twice their salary, and bearing none of the onus of accountability, extremely galling.

Whatever else it has done, the rate cut has surely gone a little way towards appeasing staffers for whom wages - assuming those at Barclays are in line with industry averages - are stagnating in the current economic climate. At the same time, it has sent them a clear message not to expect salary increases in the coming months.

But what happens beyond the coming months?

Last week, Computer Weekly suggested that the slump in the IT jobs market is at last showing signs of bottoming out, and that the first shoots of recovery could be visible by the third quarter of this year. Overnight, penny-pinching could be forgotten as organisations rush projects through to gain competitive advantage.

According to training body E-Skills UK, companies are still experiencing recruitment difficulties in 2002. These difficulties will be compounded when projects are revived and demand for specific skills begins to rise.

In the event of an upturn in the market, it is hard to imagine that the contractors who have been given such a raw deal at Barclays will hang around long enough to find out whether their 20% is re-instated, or even improved upon. The bank's betrayal of trust will ensure that these IT professionals take their skills elsewhere, leaving Barclays facing the prospect of having to plug skills gaps across the enterprise.

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