Contractors' Questions: Which IT contractor pay rates are increasing?

Contractor’s Question: My day rate is up on both 2022 and 2023. It got me thinking -- despite talk here of rates being static for most, and down for a fifth, what other pay rates for contractors like me -- those in the IT sector -- are increasing?

Expert’s Answer: I will come to specific numbers but first some context.

For any contract staffing business to grow, it’s vital that it has a robust contractor order book. We have undertaken  comprehensive analysis,which shed light on the primary reason for contractors concluding projects or assignments ahead of schedule and transitioning elsewhere.

Jumping ship

The most prominent factor that emerged was pay rate. 

When presented with opportunities that offer superior pay rates, contractors have demonstrated a willingness to transition, or 'jump ship', to more financially rewarding assignments.

This is why it is so vital that contractors are happy with the rate  on each assignment.. Their satisfaction not only fosters a stable working relationship but also mitigates the risk of turnover due to more attractive financial prospects elsewhere.

STEM contractor pay rates up 4.67%

Our business has seen a steady increase in pay rates for our specialist ‘STEM’ (Science, Technology, Engineering and Mathematics) contractors, from 2022 to 2023, with average contractor pay rates in the UK up by 4.67%.

This upward pay trend has already continued into 2024, for placements spanning December and January, the average pay rate compared to full-year 2022 has risen again -- by 4.17%.  

In line with the reported research you link to in your question, the biggest contributing factor to IT contractors seeking and securing higher pay has been the rising cost of living. But in part, it’s also linked to the number of contractors we are placing across STEM industries increasing slightly as well.  

Three hundred pounds a day? And then some…

Another notable difference with our data compared with the research you referred to relates to the average rates of contractors, which in the research (by IPSE & Workwell), was “around £300”.  

Given the specialist, and highly sought after nature of the STEM assignments we are working on, daily pay rates are higher than £300.

Consequences for clients who skimp

For clients, cutting corners on contractor pay rates can result in missing out on the best talent. The financial implications of needing to find replacement talent can surpass the initial investment that would have been made by offering competitive market rates to highly skilled STEM contractor from the start.

For reference, we are advising clients that it’s crucial to recognise and invest in the value of their contractors by offering competitive rates, if retaining top-tier talent is key to their operations. By getting rates right from the outset, companies will be able to maintain a stable workforce and avoid the unnecessary cost and disruptionof high turnover. Put simply, the value of pay rates in 2024 will be fundamental to securing and retaining the best STEM contractors.

The expert was Charlie Cox, commercial director at SThree.