Two of London’s most respected banks used the first quarter of 2016 to cut the pay of their IT contractors, with termination offered to those who refused, Contractor UK has learnt.
Credit Suisse internally announced in February that IT contractors must charge 10% less to keep their contract with the bank, which cut rates by the same margin just two months prior to the announcement.
Also in this year’s first quarter, but seemingly unaware of Credit Suisse’s ultimatum, Morgan Stanley gave its IT contractors the same ‘choice’ -- work for 10 per cent less or leave.
It coincides with the US bank reporting that its profits more than halved in the first three months of this year, a period which saw the Swiss bank report a loss of £346million.
“It’s not a huge surprise that some of the City’s largest users of IT contractors are seeking to make instant headline savings,” reflects Bowers Partnership, a contractor recruitment firm.
“Applying a percentage rate cut across the board is learned behaviour for the some of the bigger banks -- they clearly feel it has worked for them in the past.”
The firm’s Natalie Bowers recommends IT contractors accept such cuts rather than refuse and be jobless. “It’s always better to be billing while you’re looking [elsewhere],” she says.
Meanwhile, a pre-screening firm that vets contractors for financial services (FS) clients yesterday hinted that IT contractors might like what they find, as it says it knows of no other additional rate cuts at other banks.
In agreement is David Ward, a director of IT recruiters SQ Computer Personnel. “The contractors we have working at our FS clients have not been on the receiving end of pay cuts in Q1,” he said.
Despite the reassurance, IT contractors at a third bank were last night understood to have had their rates cut as of April 1st 2016, but the rumoured reduction -- a hefty 20% -- is yet to be confirmed to ContractorUK.
As to Credit Suisse’s cut, one IT contractor who quit shortly after it says he may have accepted the “haircut” had it not equated to 20%, when combined with the December cut.
The contractor also said that a “significant number” of contractors had “chosen to leave” the bank. When asked by ContractorUK what proportion of its contractors had left since the February announcement, a Credit Suisse spokeswoman declined to comment.
The bank's spokeswoman would only say: “Our changes [for IT contractors] were in line with the industry and part of our previously announced cost savings goals for London.”
Her comments will come as news to the contractor. “There was no justification provided,” he said. “[We were just given] a week to confirm acceptance of the rate cut otherwise to consider the notification email as notification of termination of contract.”
At Morgan Stanley, one contractor says the 10% cut hit all contractors at its UK operations but it was presented as a choice. "They 'offered' a 10% rate cut", he scoffed.
Yet another person familiar with the American bank's move insisted that it affected no more than a quarter of its (UK) contract workforce.
The person went onto to claim that not a large number of IT contractors refused the reduction, possibly due to most rates initially being the same, and sometimes higher, than those set by London's other big banks.
However when invited to clarify, in terms of both how many IT contractors were affected by the cut and how many quit as a result, Morgan Stanley declined to comment.