IT contractor recovery fails to launch in April 2024, despite pay premiums on new starts

The labour market bounce of late March failed to materialise for IT contractors in April 2024, new figures from an agency body show.

It means the low point which the body behind the data -- the REC -- said had likely been reached, has not been reached, at least not for IT contractors.

Demand in the UK for tech skills on a temporary basis fell in April to 44.4, from 45.0 in March (where 50.0 indicates growth), the REC found.

The score represents the weakest reading for IT contractors since July 2020 (41.6), when the market reopened from the covid pandemic.

'Changing jobs is the quickest way to get a pay rise'

But by demand declining by just 0.6 of a single index point, the benefits which a market in recovery brings are still seen as in play.

Ironically, though, the one thing tipped to unleash the recovery -- an interest rate cut -- is tied to the one perk contractors who ‘jump ship’ report today.

And an interest rate cut could make it harder to justify and land that perk.

“The market continues to weaken, but much less clearly than in previous months.

“And in in the face of inflation, changing jobs remains the quickest way to get a pay rise,” says REC’s chief executive Neil Carberry.

“[So] this is not yet a recovering market.

“The impact of high costs of doing business is still substantial. It is, however, a market that is ready to go when the economy does.”

'Pay rates improving'

Writing in the REC’s Report on Jobs, the chief executive of KPMG Jon Holt echoed:

“While there are still complexities, like pay rates improving due in part to last month’s 9.8% rise in the National Living Wage, overall pressure is easing on the labour market.

“Business leaders see this cooling, combined with weakening inflationary pressure, as indicators for the Bank [of England] to hopefully shift to a more dovish position.”

'Confidence and certainty'

If the BoE cuts interest rates on June 20th, IT contractors’ engagers will “then have the confidence and certainty to press ‘go’ on their investment strategies,” Holt says.

But invariably right now, IT contractors are trying to make hay while the sun shines, at least on rates – although not all of them successfully.

“I was asked if I would consider a Project Support role,” said an IT contractor, Mike Wigmore, in April, whose previous stints were as a Head of IT and Programme Manager.

“It was a short-term contract position based a few hundred miles away….[and] I declined…[because] the day rate wouldn't cover travel and accommodation costs.

“I didn't want to let them down by doing a poor job….[but] the response was a surprise, as I was essentially told that I was ungrateful and I can't be as desperate as I claim to be.”

'HM Treasury wants a head of cyber security for just £57k'

But it 's not just contract IT assignments where pay is seen as not living up to candidate expectations.

“Last night the MoD was hacked by China. When these things happen, it reminds me of [HM Treasury’s March 2024] job posting for Head of Cyber Security – [for just] £57k.

“Yes this [salary] is just about an ‘above average salary’ in the UK,” continued Dominic McGregor, an investor and keynote speaker.

“However, when we are talking about threats of global powers attempting to hack sensitive information, surely an investment to attract the best possible talent in the world would be more.”

'Benefits of this job include consistent pay every month'

To potentially attract talent without having to spend ‘more,’ employers in April talked up the non-wage benefits of their ‘opportunities.’

“This is a real quote from a [job] advert that popped up on my feed today. ‘Benefits are... paid breaks and monthly payroll [to] ensure consistent pay every month.’

“Mind-blowing! Thank the heavens, you'll be paid for a break you take. And monthly payroll promising a consistent payment every month! Wow, what a luxury.”

“C'mon, employers,” urged Jack Bangs of ForeTwo Group, who disclosed the ad from his LinkedIn page.

"Do better," he said. "Much better.”

'A number of IT contractors aren't getting extended'

Writing today about IT contractor pay, Pendy Hou of staffing firm First Point Group, warns candidates not to price themselves out of the market.

“We have had a number of contractors not get their contracts extended,” writes Hou, in an article exclusively for ContractorUK.

“Where contractors requested a higher rate than was budgeted, clients simply asked us to reaffirm to them that they wouldn’t be able to increase their offer.”

In the ContractorUK article, Hou confirms that a sea change for candidates would likely come about from a base rate cut.

At the REC, Mr Carberry reiterated the importance of the bank becoming less hawkish.

“Firms have told us all year that they will be willing to hire and invest in their business when confidence returns to the wider economy.

“And there is a glimmer of lower inflation and the prospect of lower interest rates starting to drive that now,” he says.

'Short supply tech skills'

Contractors well-positioned to retain a premium rate in the face of an interest rate cut, on the basis that their IT skills are ‘hot’ are numerous.

In fact, 12 IT contractor skills were listed as in “short supply” in April 2024, according to the REC’s member agencies.

The 12 are; Automation Testers, Cyber Security, Data Engineers, Data Professionals, Data Scientists, Developers, Full-stack Developer, IT, Software, Systems Analyst, Technical Roles and Technology.

The permanent IT jobs market was even harder hit by shortages in April – 17 in total, although some are scarce on a temporary basis too.

The 17 are;  Analysts,  C++ Developers, CAD, Cyber Security, Data Engineers, Data Professionals, Data Scientists, Developers, Digital, IT Directors, Senior IT Engineers, Software, Software Architect, Software Engineers, Technical Roles, Technical Sales, and Technology.