Reported by The Register, the investment banking division of Barclays Bank told their temporary workers that the cut would come into effect on 5th December. Contractors had until 11th November to inform them if they did not wish to accept the new rate. As well as the rate reduction, contractors have also been told to take a 10 day break before the end of the year.

Swiss bank UBS made a similar move in September by reducing their contract worker rates by 10%. In some cases they gave their contract workers just one day to decide whether they would accept the reduction in rates or leave. Rate cuts have also been announced at Deutsche Bank, Lloyds, Nomura and RBS.

These rate reductions are widespread across financial institutions and others may be soon following suit. BNP Paribas is reportedly planning to slash its contractor rates by 15% from 15th December and Bank of America Merrill Lynch could also announce a rate cut next week.

Are you an IT contractor working within the financial sector that has seen a reduction in your rates? Have you accepted the cut or found a contract elsewhere?

“Many professionals feel as though their salary progression has been compromised by the recession and are no longer willing to stay in their current role when they believe they may be able to receive a higher salary elsewhere,” said Sam Corcoran, a director at Hays Finance Technology.

Contractor UK commented that almost half of the IT workers felt the recession had led to decreased job security, and although it was not a motivation to look for another job, most went without a bonus in 2009.

However, the UK is now out of recession and there is increased optimism with more contract roles for IT contractors becoming available across all sectors. Contractor rates are also returning to what they once were before the recession.

Having surveyed more than 40,000 independent professionals, Skillfair said their typical fee in 2009 stood at £523 a day, down from £565 a day in the previous year. Skillfair founder, Gill Hunt, said there were a number of reasons why rates had slid but believed the reason why a lot of consultants have been asked to work for derisory rates is because of the fragile UK economy.

According to the group, nine out of ten freelance consultants expect pay rates to stay the same or increase in 2010, indicating that the bulk of rate reductions are in place already.

Freelance UK highlighted that the contractors who have seen their rates reduce the least work in change management and other high level consultancy roles, including telecoms, engineering and IT management. However consultants and freelancers supplying financial services to retail clients appear to have been the hardest hit.

Independent Contractor Services Ltd (ICS) was established in 2002 to provide individual accountancy, tax advice and administrative services to professional contractors, consultants and freelancers.  

Contract rates vary can from a very low margin, say 4%, to a extortionate margin, say 50%, but they are generally in the range of 10% to 20%. An agencies margin can differ however, depending on the contract terms, the duration of the contract and so on. Contractors might feel that sometimes the margins are too high and hence profit to the agency may seem large when looked at on an individual basis. But the agency will have fixed overheads that need to be paid, including staff salaries, business rent or rates, and insurance.

However, although it may seem like hard work, if you were to find your next contract yourself using tips we have suggested in previous articles, you could reap the benefits of knowing you would be paid the full contract rate. Recruitment agencies take a lot of the hassle out of finding your next contract, but if you are really determined, you may succeed in finding your next contract yourself.

ICS can offer accountancy and administration services to UK contractors. For more information on how they could help you, please visit their website or alternatively telephone, 0800 195 3750.