Is there a greater risk to IT contractors now?


Greater Risks

Do we need more money to compensate for that greater risk? Is it still worthwhile contracting?

A number of recent articles we have published have pointed to the greater risk that contractors are now taking in being a contractor.

Contractors have always taken risks. They know that it is part and parcel of the game. When permies complain about ‘how much money you are making’ they are able to point to them the greater risks that they are taking.

As permies are normally risk averse that normally shuts them up.

After all, in any walk of life ‘˜safe money‘ is much preferable to ‘˜risk money‘.

It used to be always said that contractors should make around double the amount that permies make to compensate for the extra risks.

Existing Risks

Contractors have always had some risks:-

1. They may experience some ‘˜on the bench‘ time when they are earning no money at all. This comes at the same time that their costs are mainly the same, e.g. mortgage payments, car payment, living expenses etc.

2. They do not have secure jobs and can be easily fired if the project is canned, if their work isn‘t up to standard, or even if their face just doesn‘t fit

3. In any downturn they are the first to go as companies try to protect their core permanent staff (before sacking some of them the following year if the downturn persists)

4. They get little in the way of compensation when their contracts are terminated and no matter how long they have been at the company there are no redundancy packages for them

5. They lose out in their career. Although they get a lot more money when they start contracting, those that stay in permiedom can start moving up the company tree receiving more remuneration and benefits as they go along. Those that stayed permie may even get very well paying senior jobs with share option packages which can make it more worthwhile than if they had gone contract

However, they are the known risks.

Contractors understand those risks and therefore have managed to work out (like actuaries) the extra remuneration that they need to compensate for those risks.

Do they now need to re-examine the risks and the compensation needed because of a new set of risks?

Do they need to d a new analysis to see if it is worthwhile remaining a contractor?

We will look at the new risks in an article coming up shortly to see if contractors need more of a gap between what permies are paid and what contractors are paid in order to compensate for the new risks.