The case for contractors

Our editorial of 15 August set the cat among the pigeons when it suggested that IT contractors struggling in the current economic...

Our editorial of 15 August set the cat among the pigeons when it suggested that IT contractors struggling in the current economic climate were only getting their come-uppance after years of over-charging for fixing the millennium bug and for e-business development work.

If our stance was harsh, it was also an honest reflection of opinions vocalised by many readers at events and in correspondence. Still, we are not blind to the pressures currently bearing down on the contractor market.

Whatever view you take on the ebb and flow of their rates, the fact remains that contractors play an essential role in UK business' IT departments. They are crucial to the smooth running of projects with a limited lifetime; and they bring to a project team an accumulation of experience borne of working in a range of organisations. In spite of the benefits they deliver, contractors need to justify themselves far harder than their permanent colleagues who are prepared to accept lower rates of pay if this ensures they have greater job security.

There is no denying that some sharp operators took advantage of Y2K and the dotcom boom to talk up their skills sets and then demand inflated rates; many IT managers still remember those days with bitterness.

But it's worth remembering, too, that contractors need to charge higher rates than the so-called permies to cover periods of sickness, holiday or unemployment. They also need to finance the training required to keep their skills sets up to date - an expensive business for which there is no tax relief.

The Government's fast-track visa scheme, which came into force at the start of the IT downturn, dealt a body blow to contractors. Computer Weekly has supported this scheme as a means by which IT departments can source scarce skills at below market rates. But we deplore the stories of companies that have abused the system by laying off domestic contractors, and replacing them with workers from overseas whose rates are drastically lower.

IR35 has only worsened the contractor's lot. If contracting offered rich pickings before the advent of the tax change, it is now financially a far more questionable means of making a living.

We at Computer Weekly take no joy from contractors' current struggles to make ends meet. The longer-term effect on UK businesses of the drift by contractors away from temporary work and into new careers is also a dangerous trend.

Market forces will always dictate the amount contractors are paid, as they have done over the past three years. When the much looked-for upturn finally arrives, the worry must be that ill-conceived government policy could return to haunt us. Skills become redundant just as employment visas expire and as more contractors move out of IT, the UK could find itself facing a yawning skills gap once again.

And when that happens, IT employers can expect the remaining contractors to start naming even higher prices.

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