Barclays and Citigroup are the latest to cut IT Contractor pay

Back in 2015, four major banks cut IT contractors’ pay, leaving them with no choice but to take the reduced income or forfeit their job.

Slashing as much as 14% from their pay, IT contractors working in the once lucrative banking industry faced a tough time in the run up to Christmas.

Unfortunately, 2016 has so far brought even further cuts, as Morgan Stanley and Credit Suisse slashed daily IT contractor pay in this year’s first quarter.

Now, Barclays and Citibank have followed suit by telling their IT contractors that they will need to work for less money or lose their contract.

Citigroup has become the largest IT contractor pay reducer so far this year, with a hefty cut of 20% and it is understandable that those in the industry are becoming concerned that they may also be hit with rate cuts.

Barclays, on the other hand, are cutting rates by 5% and capping the amount of billable time IT contractors can accrue.

Many affected IT contractors have ended up jumping before they’ve been pushed, including one long-serving contractor who claims he has faced eight rate reductions since Barclays hired him. 

What to do if a rate cut looms?

Whether or not you work as a contractor in the banking industry, IT contractors should always be prepared for potential rate cuts and the implications.

It’s worth noting that the banking world has been the first to issue sweeping ‘take it or leave it’ pay cuts on such a large scale since 2008, so it is important not to panic.

However, there are a few things that you can (and should) do to keep yourself prepared for possible cuts in the sector you contract for.

Although you may feel settled in a long-term contact, it makes sense to keep a close eye on the market and suss out opportunities before you need to rely on them. Keeping your CV up to date will help keep the pressure off if you do find yourself in a situation where you urgently require work. Reviewing and updating your CV every six months should be all that’s needed to keep things at a manageable level.

Speaking to recruiters and keeping a portion of your income to one side will mean you have things in place for if the time ever does come when you’re forced to take a rate cut or surrender your contract. If you can get into the habit of saving one third of your monthly income, you will be in a much stronger position when it comes to negotiations for future work, as you won’t feel compelled into signing up for something you’re not 100% confident about.

Strategic tax planning is another way to maximise your finances and ensure you are retaining as much of your hard earned income as possible. By working through a limited company, you can keep up to 85% of your earnings after tax and NI obligations, in a way that is both legally compliant and easy to set up.