The Devil's contractors

IT contracting: It pays to be a freelance IT expert - as employers have found to their cost.

When Ron Moss, managing director of CSS Trident, posed a question over the Internet about whether IT contractors would take a pay cut in exchange for being paid weekly, the response was unequivocal: 94 per cent said no.

Four years ago freelance IT staff were there for the picking - location and rate accepted, as long as there was a contract on offer. Now their domination of the market continues unabated and their attitude uncompromising.

There are signs, however, that companies which use freelancers are looking for ways to cut their outlay. While contractors prefer short contracts, so that they can ask for increases in their rates more often, some companies are trying to negotiate longer terms. This is in the up-front category of damage limitation. Companies may also scour the country looking for the cheapest region to set up a project. Craftier methods of stifling costs include payment by the day rather than the hour and sticking to a strict pro-rata equation of the permanent rate.

Some organisations, having initially gone down the freelance route to save money, are returning to permanent staff in an effort to cap spiralling costs. They are finding that a third of all registrations with one major agency are permanent people seeking contract jobs.

The continuing demand for IT staff has left employees with little choice but to pay the rates demanded. Last year, the agency staff market showed growth of 22 per cent, reflecting in the turnovers of CSS Trident and other large agencies, such as Delphi, CRT, Elan and MSB.

According to the last rates survey from CSS Trident, the average contractor's rate tops pounds 1,000 a week. CSS's next quarterly survey, expected next month, is unikely to tell a different story from the last quarter, which showed freelancers' incomes leaping ahead of staff salaries.

Tony Webb of Methods Applications, an agency in Covent Garden, says companies are desperately trying to recruit permanent staff. One of his City clients is offering a pounds 60,000 salary for a permanent member of staff with knowledge of data analysis. "Whereas four years ago you could phone up anyone, anywhere, ask them to work, tell them the rate and presume they'd do it, we're now having to take on people to ring them in the evening because otherwise we're talking to answering machines," he says.

"Rates have gone up so that people who were asking for pounds 250 a day are looking at pounds 300 or pounds 350. Clients are saying that they've only given their staff a 4 per cent rise and can't give a bigger increase than that - to which the contractor replies that he's been offered more. If clients are slow in looking at CVs, people are snapped up.''

In a survey of IT ads in the trade press and quality nationals, Computer Weekly discovered that the average salary for an IT manager had gone up by 5 per cent in a year. Systems analysts, programmers and programmer/ analysts were being offered 8 per cent more, software engineers and network support staff 4 per cent more, and technician operators 10 per cent more. It was the highest volume of jobs in any one quarter for seven years.

This microcosm of the free market is leading not just to differences in pay rates between freelance and permanent staff, but also to variations between skills sets. Demand for C++, Oracle, Visual Basic and SQL has gone up by 50 per cent in a year - while Windows NT rose by 277 per cent. Demand for the mainframe skill Cobol, however, has dropped. Unix is still in biggest demand.

Rates vary according to demand for a particular skill. By no means all freelancers are paid megabucks, and some clients keep bills down by paying a daily, rather than an hourly, rate, then specifying the hours over the week. If a freelancer's skills are not in short supply, he or she could be offered a contract in direct proportion to the full-time salary. "It could be six months at the equivalent of pounds 20,000 a year and nothing at the end of it," says one recruiter.

A former permanent worker describes companies' efforts to cap increasing costs as "not as blatant as mentioning pay cuts - it's very subtle". Permanent staff take the brunt of these, he says. Their targets can simply be moved, or they can find that a new member of the same department is being paid much moren