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The recession has had a detrimental effect on recruitment in the UK but new research conducted by ReThink Recruitment found that IT contractors were actually hit harder than anyone else, particularly as contractor rate reduction programmes were commonplace throughout 2009.

ReThink, a technology staffing company, found that during last year a massive 98 per cent of IT contractors were faced with pay cuts or pay freezes. The average pay cut was around ten per cent. This was in comparison to 71 per cent of their permanent counterparts. The research also found that over half of the IT directors surveyed were planning to freeze pay rates during the coming year and 83 per cent expect that contractor rates will stay the same. It is unlikely, however, that IT contractors will see their pay rates cut this year.

Research suggests that the demand for experienced and skilled contractors is now beginning to pick up again. This is particularly true of contractors who are trained and skilled in LINUX, .Net, Java and C#. Demand has increased for these skills sets over the past three months, which suggests that contractor opportunities are set to increase in 2010.

Director of ReThink Recruitment, Michael Bennett, commented: “Contractors are more vulnerable to market fluctuations, so it’s no surprise they have been hit hardest by the recession. That said, with the job market now tightening rates for contractors should rise ahead of pay increases for permanent staff.”

There seems to be a direct link between the recent demand for IT staff and the recovery of the banking industry. This is the belief of the Association of Recruitment Consultants (ARC) who believe that many companies are looking to upgrade their IT systems as the UK leaves recession. This means that skilled IT contractors are back in demand.

This increase in job opportunities was actually evident in the most recent Report on Jobs from the Recruitment and Employment Confederation, which showed that employment for both contract and permanent staff increased in February.

Chairman of ARC, Adrian Marlowe, said: “As far as IT is concerned, our members have also experienced an increase in IT employment requirements. At the moment, there is definitely an increase in work of that nature.”

He continued: “I think that having laid low for 18 months or so, those organisations that have larger IT requirements are taking the view that they need to upgrade their systems, hence the IT requirement in that regard.”

However, the REC have warned that there will need to be “radical reform” to ensure that the ongoing cuts in public spending do not have a negative effect on recruitment opportunities. Their Report on Jobs did show the sharpest increase in the number of vacancies between January and February through the past 30 months, however the report noted a slowdown in billing for contractors during that period.

Chief executive of REC, Kevin Green, believes that contractor opportunities in the public sector could be set to decrease: “Looking ahead, there are indications that recruitment in the public sector could drop off fast. A new approach to public sector resourcing is now critical and will have a direct impact on the wider employment outlook. We question whether the public sector has the right capability in place to lead the necessary transformation and put in place staffing structures that will keep costs down while improving public services.”

While experts are predicting that the IT sector is set to recover next year, 44 per cent of those seeking jobs from the IT Job Board believe that it will take until 2011 for the sector to recover. Twenty five per cent of those surveyed said they were looking for work as their role had been made redundant.

The IT Job Board reflected: “As we approach the last month of the year, this is a common time to start re-evaluating your position, your pay and your career progression. Many [IT professionals] decide to rethink their situation and start contemplating a new challenge for the New Year.”
Peter Healey, the IT Job Board’s sales director, commented: “I believe that next year the finance sector will really pick up. Banking was the first to be hit during the recession, but it will also be the first to recover, and it will offer a lot of opportunity in terms of IT recruitment. As we continue to get to grips with social and business networking, Web 2.0 skills will be critical, for example .Net and Java.”

The website continued: “Many companies’ budgets are renewed in January and this coupled with positive forecasts for the economy in 2010, could mean the New Year jobs wave will counterbalance the number of applicants. Fortunately, IT seems to be a thriving area that has not been as badly hit as some other industry sectors, so if you are considering a career move, there’s no time like the present.”

Following UK based economists Markit’s confirmation of recovery in the IT sector, the Monster Employment Index figures for October confirm that employment opportunities in the sector rose higher than they have over the past eight months. This Index counts the millions of job adverts online across all sectors.

Hugo Sellert, head of economic research at Monster Worldwide, said that it was too early to draw conclusions that hiring trends have completely turned around in the IT sector. He pointed out that in comparison to this time last year, IT vacancies have dropped by 23%. In fact they have dropped since 45% since their highest point in February last year. Mr Sellert confirmed that last month IT vacancies actually bottomed out. Vacancies are increasing at a relatively slow rate and redundancies are continuing.

Sellert stated: “Labour turnover typically falls during economic downturns as employees perceive it more difficult to get another job, and therefore tend to stay in their current position. As signs of optimism return to the economy, more workers consider changing employment, thereby creating a higher need for replacements.”

While other surveys have confirmed a rise in hiring intentions, Sellert suggests that “it could take some time” before this translates to online vacancies. This is coupled with extensive candidate availability due to the number of layoffs which have occurred in recent months. This is backed up by data from TotalJobs.com who report 148,000 applications across 15,000 IT jobs advertised in September. This is not an increase in users of the site, but there has been a decrease of around two-thirds in employment opportunities in the sector over the past twelve months.

It is fair to say that the effects of the recession have been felt by employers across the UK. However, figures show that both Scotland and Northern Ireland have actually experienced an increase in IT recruitment over the past five years. However, the majority of recruiters in Scotland admit to the recession affecting their team morale due to increased workloads and training cutbacks.

Jacqui Hepburn from the Alliance of Sector Skills Councils in Scotland has said that while the IT sector was indeed affected by the recession there are now signs that it is “clearly stabilising”. Much of the strength of the IT sector in Scotland has been attributed to the lessons learned from the demise of the dotcom years and the acceptance by businesses that they must be flexible in their business models.

Jacquie Hepburn commented: “The IT professional workforce will be central to the UK’s recovery from recession. All industries need, and will continue to require, highly skilled technical professionals. There is an arguably even greater need for business-focused technologists who can understand business needs, know how to apply IT to solve business problems, and can manage technology projects to deliver direct business value.”

The ‘Skills, Business and the Economy’ report which was published a number of weeks ago included advice from the Alliance that the Scottish IT sector could be boosted by encouraging more young people to train for careers in IT.

Ms Hepburn concluded: “The UK must continue to invest in the technology skills pool: from the IT professionals who create the systems, to the business managers who need to be able to exploit them for business benefit, to the individuals who need to be able to use them in their day to day jobs.”

Specialist accountancy firm SJD Accountancy has joined forces with specialist IT recruiter Technojobs to create a rate checker for contractors. This new service will cover the most up to date IT contracting including Java, SQL and C++. The rate checker will be a useful tool for those considering a working as a contractor as well as experienced contractors.

Information available on the web page will include average national and daily rates of pay across all skill sets within the sector.

Managing Director of SJD Accountancy, Simon Dolan, stated: “SJD focuses on giving as much advice and guidance to contractors as possible. We’re specialists and have been helping IT contractors make the transition from permanent work to contracting – we hope our new contract rate checker can make the transition that little bit easier.”

SJD Accountancy is a sector leading company providing accountancy services to freelancers and contractors. They are accredited by the Professional Contractors Group as a Quality Accountant. Meanwhile, Technojobs is an award winning IT recruiter, advertising over 12,000 contracts every month.

Sales and Marketing Manager of TechnoJobs, Anthony Sherick, commented on the new partnership service: “The page has huge value for those entering the contractor market as well as experienced IT contractors’. This project seeks a natural fit between the two companies. We have a number of other projects on the go and have plans for future partnerships that will further benefit both contractors and recruiters alike”.

Parity Group, which provides IT services and recruitment, has announced their interim results for the period ending 30^th June 2009. Their results show that the Group continued to experience “difficult trading conditions” during this period. This is further evidence that the IT sector has a long way to go before it recovers from the current economic downturn.

Parity Group’s revenue was £62.8m, down from £66.3m in the same period last year. Their operating profit had dropped from £735k last year to £336k in this period. The Group has been focussed on cutting costs over this period. This has included the closure of two offices, in Leeds and Hemel Hempstead.

Chief executive of Parity, Alwyn Welch, made the following comments on the results: “We are continuing to experience difficult trading conditions due to the severity of the recession. Demand for skills in our areas of focus in Resources has held well, whilst the discretionary nature of much of Solutions’ business means that market has continued to see extended procurement cycles, project delays and cancellations.”

He continued: “We expect market conditions to remain difficult during the remainder of this year and the first half of 2010. We will therefore continue to manage with care, balancing the need to retain and motivate our staff and to invest in sales capacity to compete, with the need to be prudent, which has so far delivered a resilient performance in Resources and an improving situation in Solutions. Management’s expectations for trading performance for the year remain unchanged.”

As news comes that the government is set to toughen the rules regarding intra-company transfers, figures have been released which show that twice as many IT workers were imported into the UK last year than workers from all other industries combined. This was despite the number of IT workers who were out of work in the UK due to the recession. Throughout 2008, 29,240 non-European IT workers were brought into Britain using the intra-company transfer system. Only 14,255 non-European workers came into the country on intra company transfers to work in other sectors, including finance and telecoms.

The original theory behind intra-company transfers was that employers could transfer workers who had necessary skills that proved difficult to find within the UK. However, the Association of Professional Staffing Companies who have obtained this data under a Freedom of Information request, found that the majority of these workers were imported from India and were working at software houses. The Association believe that all vacancies must be advertised in the UK before companies should be allowed to import workers. As it stands there is no obligation on companies to do this and as they can often pay the foreign workers a lower wage, these transfers are often used in a bid to cut costs.

Now, the government have disclosed their plans to tighten up the rules of intra-company transfers. Companies will now have to prove that no UK worker is being displaced by the introduction of a non-EU worker. The Association of Professional Staffing Companies believe that this does not go far enough. They have stated that the decision not to insist on positions being advertised in the UK first was “disappointing”.

Oil giant Royal Dutch Shell has issued a pay ultimatum to its IT contractors. An internal memo sent last month advises contractors that they will face termination unless they accept a pay reduction of 12 per cent. The policy of reducing contractor rates was first introduced across the financial services sector thirteen months ago at the start of the economic downturn.

Leading recruitment agency Jenrick CPI stated that over the past three months the majority of clients are telling IT contractors to take a pay cut of between 10 and 20 per cent or leave.

Managing director, Philip Fanthom commented, “In most cases there has been a period of consultation with the contractors which had lead to some interesting and sometimes heated debates.”

He said that permanent and contract IT staff felt that they were placed in a no-win situation.

IT analyst, Richard Holway said that ultimatums were ‘widespread’ as British IT contracting staff battled against the discounts being offered by their offshore rivals. IT contractors will now worry that other companies in the energy, oil and gas sectors will follow the precedent set by Shell as this is what has happened across the financial services sector.

IT agency, SQ Computer Personnel said, “Clients with significant numbers of IT contractors are taking advantage of the downturn in the number of IT contractor vacancies. [Clients are] imposing ‘take it or leave it’ pay cuts on contractors, usually mid-term during the contract, often despite the success and recession-proof aspect of their industry sectors.”

Founder of SQ, Bernie Potton said, “Agencies obviously pass this pay cut on to the contractor, taking a 10% hit in their own profit in pound note terms, but maintaining the same percentage margin. Some contractors have got upset with this approach, claiming that the mid-term pay cut is unfair and unethical, which it is, but unfortunately it is contractually valid.”

Recruitment firm, Hays has carried out its second survey since the start of the current economic downturn. Their findings show that recruiters consider leadership skills as one of the most important attributes when hiring for their IT departments. This research is likely to encourage jobless contractors to talk up their experience of management processes and team leadership when applying for positions.

Hays commented that managerial techies are still one of the hardest groups to recruit within the IT sector. This has remained the case despite a wider pool of candidates who are less likely to negotiate about low pay rates.

Managing directors of Hays IT, James Lloyd Townshend said that pay has been “driven down because candidates are more readily available and generally have less negotiating power.”

The survey also showed that one of the main issues for employers is the ‘cultural fit’ of the candidate into their organisation. Many employers are now spending more time and money on developing the communication skills and leadership qualities of their IT management staff. This has led to 80% of the firms surveyed responding that they had confidence in their IT managers to do the job required of them. Hays reported that the 122 IT bosses that they surveyed said they were looking for business intelligence consultants and enterprise architects.

However, the latest REC Report on Jobs reported no shortage of any particular contract IT skill. This report said, “Although temporary/contract staff billings decreased for an eleventh successive month in June, the latest fall was the least marked since last September. The slower reduction in short-term appointments reflected a weaker drop in demand for temp staff.”