Is it feasible for contractors to secure a rate rise?

Demand for IT contractors in financial services has fluctuated throughout this year, but the blanket 12% rate cut imposed by investment banks in 2008 has yet to be universally reversed. Is it therefore wise for individuals to start battering over pay?

Despite positive sentiment from the recruitment industry around contractor hiring, the latest figures from pre-employment screening firm Powerchex point to a 60% year-on-year slump in job offers. In fact, it would be wise for contractors to go permanent, it suggests.

With such a mixed picture, it's understandable why banks have been reluctant to hand out rate increases. Most rises have been implemented because of individual negotiation, and as a result there's a lot of imbalance within organisations, suggests Ben Cowan, associate director in Astbury Marsden's contract team.

"Those who lost their jobs have had to accept lower rates in order to secure a new role, while those maintained have been able to negotiate upwards," he says. "Generally, the only widespread bounce back in rates we've seen is within risk, financial reporting and trading systems around flow products. We're asking for rate increases with every candidate that secures an extension and achieving it around 50% of the time."

Contractors with expertise around third-party applications such as OpenLink, Murex, and Calypso are also in a good negotiating position, but the key to securing a pay rise is accurately gauging your value to an employer at that particular time, suggests Johnny Walker, at IT in finance recruiters Magnus Walker & Partners.

"Choose a time when your employer needs something from you," he says. "This can occur when the contract is up for renewal, but the program of work is mid-stream, or when the work is at a stage where the time cost and delay of changing contractor will cost more than paying the existing one more."

If you're a talented techie, or the bank is reluctant to increase headcount, the chances are that you'll be handed extra duties, or more responsibility, during the course of the contract. If this is more than your basic contract states, a recruiter is more likely to be able to batter a rate rise, as you've effectively been promoted.

"It's all very well believing that your skills make you a superstar, but your role and responsibilities are of average value to an organisation, it's difficult to justify a pay increase," says Paul Elworthy, director, IT banking and finance at recruiters Hudson.

It also depends on the organisation - some bigger banks will have strict processes in place around rates, and trying to bypass them is counter productive. Others, as Cowan points out, are more flexible around offering the market rate or above to secure the right person.