Paid More Money – Do contractors now need to get more?

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Paid More Money
Paid More Money

Paid More Money

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Should contractors be paid more money now that there are greater risks involved?

This is a follow up article to our article ‘Is there a greater risk to contractors now?’

The argument is that as contractors now face greater risks then need extra remuneration to compensate for the extra risks that they are taking.

And they need to take those into account when considering if they should remain as contractors.

Those considering becoming contractors should also take them into account too.

So what are the new extra risk factors?

Extra volatility in the Contract Market

Contractors always knew that they were more sackable. However, according to a reader in a recent article, backed up by some others in our Comments section, clients have become more likely than in the past to invoke notice clauses than just to make their decisions at contract renewal time.

According to the reader, one client got rid of a contractor who had finished his work early in order to save just two weeks money.

Risk of being sued

According to a recent article, contractors are now at greater risk of being sued. There have been several instances of contractors being sued by their clients.

Where bigger contracting firms normally come to a settlement and give back a percentage of their fees to unhappy clients, contractors are less able to do so.

It was always the case that, the more that indemnity insurance that IT contractors took up, the more that clients would become more litigious and try to sue them. This is whether they had the insurance or not.

It has alerted them to the fact that contractors can be sued.

Bigger troughs in the Market Cycle

When I first came into the industry, economic downturns were not necessarily bad for contractors. Previously Finance Directors saw computer systems as a way of saving money. They used them to cut costs as they enabled them to get rid of those who previously did the work manually.

These were mainly transaction processing systems.

Nowadays most of the manual labour has been mostly dispensed with. Also, rewrites of transaction processing systems don‘t get rid of much extra labour.

Furthermore, a lot of the systems nowadays are business opportunity and information systems. So if there isn‘t any new business about there is no point in creating major systems enhancements to get it.

Therefore firms are more likely to get rid of those who work in IT, and especially contractors, during a downturn. This means that once a decade or so great swathes of contractors may be earning nothing for long periods. Also, they will end up spending previous profits.

Paid More Money as Contracting a Riskier Business

All these factors mean that contracting is a more risky business than it used to be. This means that a greater differential is needed between what they could earn in a ‘safe‘ permie position and what the need to earn as a contractor.

Of course the question is, with all the other options open to clients like offshore outsourcing and Work Permits, whether contractors will be able to command the extra money needed for the extra risk.

However, the portents look a lot better than they did just 3 years ago.

As the Supply of available contractors lessens and the Demand for them grows (as is happening) then the economic laws of Supply and Demand say that the price of the commodity (IT labour) should rise.

But will it rise enough to compensate contractors enough for the new extra risks that now face them?

That remains to be seen!

Perhaps contractors should be paid more money.

 

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