How much can you earn as a tech contractor – and does geography matter?

The technology sector is a high-paying industry and as a result, contractor rates in the UK are strong, writes Rhona Carmichael, chief commercial officer at Harvey Nash, part of Nash Squared.

Fortunately for IT contractors, upward pay pressures are numerous

Tech roles are specialised and technical, which attracts a premium in itself, while the ongoing demand for technology skills as businesses pursue their digital transformation agendas keeps rates high. Shortages in key areas such as cybersecurity and big data further drive rates up.

In the wake of covid-19 pandemic, we saw a huge spike in pent-up demand for technology talent as businesses recovered, triggering some steep increases in contractor rates on the back of companies competing with each other.

Where tech contracting is at in 2023

It was very much a candidate’s market. That has tailed off somewhat in 2023 as conditions have calmed down in a generally challenging economic climate. Nevertheless, while contractor rates are now increasing more slowly, they are still generally going up.

Securing technology resource – both permanent and contract – remains key to a host of businesses in a host of sectors.

How much you can earn as a tech contractor?

But, right now, how much can you earn as a tech contractor? The answer, of course, is that it depends -- and on a number of factors. Rates could be anything from close to the national minimum wage (for a basic helpdesk support role, for example), to several thousand pounds a day for an interim CIO or other technology executive role.

Typical rates we’re seeing at the moment for common roles are in the range of £250 -- £600 a day for Infrastructure contract roles, £500 --£700 for Software Engineers, £500 upwards to as much as £750 for Architecture contract roles, and contract Business Analysts commanding between £450 and £650 a day.

Go up, to go up

Generally speaking, the more managerial and strategic the role, the higher the rate is likely to be. So, interim executives such as CIO or CTO command the highest pay.

Rates with those two roles may start at around £750 a day (as a minimum) and climb into the thousands.

Other tech managerial roles such as project or programme manager can expect to come with a higher rate attached than, for example, a ‘doer’ like a coder or developer.

Rate factors (includes IR35)

As well as the specific role or specialism, the rate you can command as an IT contractor depends on your experience, qualifications and track record.

Make sure, therefore, that you highlight all relevant experience and achievements on your CV, in interviews, and in conversations with your recruitment consultant.

Other factors come into play too. If the role falls inside IR35, then you are likely to be paid a higher headline rate given that you will be taxed at source. The more stable and long-term the contract, generally the lower the rate on offer is likely to be – the pay-off for the contractor being the greater income certainty and peace of mind.

This is where personal preference and lifestyle choices really come in: are you looking for predictability and security, or are you drawn to more unpredictable and perhaps ‘exciting’ work that attracts a higher rate but may end at short notice?

The sector you apply to work in will also have a bearing on rate. A Java developer in the public sector, for example, is likely to be on a lower rate than their counterpart in a big bank. Larger corporates (including Big Tech firms) tend to have deeper pockets than smaller and private businesses, and will use that financial muscle to attract the talent they need.

Geography opens up, but covid has closed the gap

And what of location’s impact on IT contractor pay; does geography matter?

This is one aspect where covid has really left a legacy. As with other sectors, the majority of tech contractors (and indeed permanent IT staff) work on a hybrid basis, and some are even fully remote. There has been a democratisation -- where you’re based matters much less than in the past.

It also means that rates have become more uniform. There is still something of a North-South divide in the UK, with higher rates in London and the south-east in particular, but the differential is much lower than it used to be.

Nevertheless, a pay gap does remain and as a result of the hybrid/remote working shift, we have seen more candidates based around the country applying for premium roles in London and the surrounds -- making it harder in some instances for employers in parts of the North to find the talent they need.

Final thoughts

In short, there is a lot of opportunity for contractors in the tech industry. Find a good recruiter, develop and maintain a good network of contacts, keep your skills refreshed and up-to-date, and market yourself well. The work is out there and is generally well-paid. Impressing on a contractor basis may also open up permanent role opportunities, if that is what you’re looking for. With so much demand, there really is a lot of choice!