HP offers contractors a choice: 5 per cent pay cut ... or 100 per cent HP has told some IT contractors to expect at least a five per cent pay cut as it looks to eke out cost savings across the organisation. A letter sent out by IT employment agency Advanced Resource Managers (ARM) IT Ltd last week to the behemoth's field of techies confirmed HP's intent to end-of-life its existing Enterprise …
"Whatever happened to an employment contract?"
It's phrased like this...
You will:
1. Accept an x% cut to your contract rate, or
2. We hereby give the required (probably 4 week) notice period starting at date y.
In essence, choose your option but there are only 2. I don't agree with it and it often means all the talent leaves.
I know someone who was faced with this. He just went to the client (who really values him btw) and told them he's been told that his contract ends at the end of March (he told the client that HP had effectively told him his contract was ending since he wasn't prepared to take a 5% cut).
Turns out the client knew nothing about all this(not a small client either) and the shit started hitting the fan.
I understand that exceptions can probably be made.
"asked"? That's a joke. They simply inform their suppliers how much less they will get paid for the same work next year, and they can take it or leave it. The company my wife worked for dropped an HP contract a while back, they'd have been making a loss on it after the latest cuts in payment. Sadly with few other contracts aorund that company ended up closing the local office completely and laying everyone off. HP makes the business practices of companies like Tesco look almost charitable.
Yes that's how it works. You reduce the amount you're willing to pay for contractors, they (and the companies that support them) either decline to work for you at the new rate or they also cut costs by reducing overhead or the rates they pay. No need to take a loss. If it's profitable for others then there are efficencies to be found (maybe closing the local office). If no one can make a profit at that level then you end up with no takers and have to raise your rates. Supply and demand, we let the market set the rate and push for it to be as low as possible while still getting the people we need.
Now if you tell me we loose the best people because they can get higher rates elsewhere I can't argue with you as I've observed it, but apparently we don't need the best as senior management insist on paying for good enough.
As a contractor you're on the absolute bottom of the food chain so what do you expect? 5% isn't bad considering we had to take 15% at my last gig Q4 2010 - why I'm not there anymore. Transience is consultant mantra - if you start getting too comfortable at one place you are an employee-wanabee and deserve all the bad treatment you get.
Beer icon because some of the most successful interviews I've been to were at pubs, at my request.
Contractors may be on the absolute bottom, but at EMC in 2009, employees didn't fare much better. At the end of 2008 we were told we'd be taking a voluntary 10% pay cut for 2009. No raises or stock grants in 2009, and same again in 2010 after our pay was restored. Never mind that they continued to make double digit revenue increases during the same time period.
But do you think Joe Tucci took a cut?
" Never mind that they continued to make double digit revenue increases during the same time period."
Hey, I found someone who doesn't know what margin is.
Off to cry about record revenue for oil companies are we?
You know the government makes more per gallon of oil and gas than the oil companies, right?
Stop hiring contractors through agencies or only pay them a flat finders fee. Those bastards slap on a huge markup on the daily rate which would be better off in HP's or the contractor's pockets or split 50:50. I've yet to see an agency do anything to justify their continuous involvement after the initial hire..
I can’t believe I am about to (kind of) defend agents, but for the most part, they also manage the payroll. In all but one contract I have ever had I send my invoices to the agent and they pay My Ltd Company. They deserve a fee for that, although that doesn’t seem too tricky and I’m sure their fee is made up of far more profit than cost-covering.
@Tiny Iota
"that doesn’t seem too tricky" to me either, but in my last two contracts the agents (big agents: Elan and Hays) have managed to mess it up.
Nonetheless, I'm prepared to defend agents, too. I'd hate to have to negotiate with clients direct, and I don't want to waste a lot of time canvassing for jobs. Plus, I suspect that agents who get on the preferred supplier lists for big companies (such as HP) have their commission rates pared down as a quid pro quo.
When I was contracting (I'm a permie at the mo), I had a management company that would invoice for me, do my expenses and tax returns. I'd submit a timesheet to them. They'd invoice whatever waste of space agency was in the middle. The waste of space agency would sit on the invoice for however long before slapping a markup of their own and invoicing the client. The client would sit on that invoice for a while before paying. The money would then rest in waste of space agency's bank account for another while and eventually I got paid, normally 2 months after the fact.
The agency's sole purpose as far as I could tell was to put a full month of extra time between me working and getting paid for it. They also got in the way when I wished negotiate contract extensions, rate increases, flip jobs or whatever. e.g. if you want to quit a place you have to endure them attempting to persuad you not to. One client agreed to buy me out of my agent and we split the savings. Everything improved immeasurably and I got paid more. Another place point blank refused to hire anyone except through an agency.
I don't know why since it doubtless added an extra 10-20% to the rates. One agent said he had place 10 people in the same place I was in. In other words he was getting paid up to 2x my daily rate for essentially sitting on his arse while we worked. I hate agents.
@DrXym
"The client would sit on that invoice for a while before paying. The money would then rest in waste of space agency's bank account for another while and eventually I got paid, normally 2 months after the fact."
That's a very different experience from mine. I first started contracting on a self employed basis and the second client took anything in between 90 and 180 days to pay. The upside of that was that I was on a rate about 50% greater than an agency would have offered, and I never doubted that I would get paid.
Agencies on the other hand have always paid me on the nail, and I assume before the client paid them.
"I don't know why since it doubtless added an extra 10-20% to the rates."
That's down to the tax authorities chasing clients for tax bills when a self employed contractor doesn't save enough to pay their tax bills. Using agencies avoids that risk.
Dr. Xym, a big part of the "payroll" mess is not the payroll admin, but "having people on the payroll".
That means not being able to fire them within a week (as in this case with consultants), tax complications, union complications, and building up gigantic pension fund provisions (ask Boeing and GM) that mean you may well get squeezed out of the market by upstarts if your typical workforce declines over time.
"not being able to fire them within a week"
UK law allows you to fire a "new" employee without cause for up to two years.
"you may well get squeezed out of the market by upstarts "
Blame that on management, not on the status of employees.
"if your typical workforce declines over time."
You mean like if the so-called "permanent" employees never get any chance for training, and the contractors with a clue are never there long enough to make a difference (and even if they did know what needed changing, they daren't say so because it makes them "not a team player" and they'd never get to come back).
While I've seen an agency take 103% of what I make (that didn't last long...) there is some justification for some fees. Agencies usually pay weekly and large companies usually take 30 days to cough up the money on an invoice.
That said, in AU the agencies charge the contractors to do payroll, which is money for nothing, so I don't see what the rest of their commission goes on. All the agencies do is thin the inbound CV avalanche, which any corporate staff admin could do. It mostly seems to be about moving administration costs from liabilities to current account costs.
I really don't see how you can justify 12%+ of your total contactor fees on agency costs if you have a large number of contractors.
The agencies don't just do payroll as P.Lee and others indicate. They undertake what is known as factoring - paying you within 7-10 days whilst waiting for ages for huge corporate to bother remunerating. Anyone who didn't get paid promptly probably had an agent working as a strict A to B middle man. However I can't see the logic of 10-15% commission on top of a daily rate when a company already runs payroll.
...this is what contractors are for.
The employer sets the rate they are willing to pay, the contracotr decides if they want to work for that money. Then at the end of contracts, you renegotiate.
Many are on rolling monthly contracts. It's up to the employer if they change the conditions, it's up to the contractor if they accept it.
That's why then tend to be paid more, as they have no job security.
Last December at BG Group, they decided to review contractor rates so they were more aligned with the rest of the market, so demanded that all contractors accept a rate reduction from January 2012 onwards before contract extension discussions could start.
I'm just surprised that everyone's rate, from project manager to support staff, was exactly 10% above current market rates prior to this review. What a coincidence!
@fishman
Fishie, fishie, fishie...what makes you think upper management and executives get paycuts?
Bet you a pint of the brand of your choice that they'll be giving themselves a raise.
I really pity the contractors. Onsite techs get paid a pittance and have to deal with suctomers directly. Now they are asking them to take one of the team...what stopping them from striking?
This type of BS kills morale. Another move that kills morale is putting your company in OPEX for ~6 years (and counting), lowering bonuses and benefits for the plods that make the damn monster work, claiming there is no money for that and then the next day, claiming that they have bought yet another company. While I understand companies are not here to pay me a lot of money, it would help morale and employee loyalty to see some appreciation going our way.
Ah, but an employee costs a lot more than just the salary, matey. While its true that contractors can make a lot more, there aren't many times its double, especially if there's any middle men. I'm a current (soon to be former) HP contractor and I'm below what they calculate their contractor cost at (as a former EDS employee, I know there's a standard rate they assume every contractor will cost). After being on both sides of their fence, things are pretty rosey both directions.
The number of employees that engage daily in sleep-walking through their job are the real cause of all of this. Downvote away!
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10% cut or no contract renewal, but we accepted it because it was for a whole year.
Except that year only lasted 3 months, when we had the choice of another 10% cut or no contract. Those new figures made permanent employee pay levels with employee benefits, paid holidays etc look very attractive.
And HP promptly went out and bought a small fleet of Gulfstream jets.
Moral at our place plummeted and most of us wished we'd taken the chance to jump before we got depressed.
.....you want to pay 5% less then I will work 5% less. If you don't like that don't come to me asking for a 5% reduction for free. If you've ever asked your boss for a 5% pay rise they will respond with what do I get for my extra 5% or simply tell me to fuck off. Either way they don't back down so why should you the other way around.
Mines the one with a copy of "I used to be a contractor but the recession just gave employers an opportunity to take the piss so I went perm" in the pocket.
A "professional" is someone who is good enough at something to earn a living at it, and does a good job (vs "amateur", or vs "dilletante").
Managers have re-defined "professional" to mean, "someone who does whatever we tell them, someone who 'sucks it up' and soldiers proudly onward."
Do not fall into the linguistic / mental trap of accepting management's re-definition of the word.
It's 'morale' not 'moral'.
I say put up or shut up - many full time employees are suffering pay freezes / drops or losing their jobs - so 5% is not that bad. Try calling your agents and tell them to cut their fee so you end up with the same.
At the end of the day if you don't like it you know what to do - if you recon you could get more elsewhere - again - you know what to do.
and whilst 90% of the contractors agreed to the terms on the day pretty much all of them left as soon as they could arrange alternatives, leaving the client company up sh1t-creek IT wise for months afterwards. In the end they had to hire more contractors to cover the backlog of work caused by their existing ones walking away and taking historical knowledge with them.
So HP IT, expect projects to fall behind and open help desk calls to increase in number, leading to any savings made being spent anyway to bring everything back into balance.
Fine - you pay me 5% less, I work 95% as hard. I'll still outperform your offshore permies by a substantial margin. (To be fair, I probably out-cost them by a substantial margin, too.)
I can devote the spare 5% capacity to looking for another contract. And I can start saying "Yes" to the agents who are forever asking if I might be persuaded to leave before the end of my current contract.
"pretty much all of them left as soon as they could arrange alternatives"
Or maybe that's what they want - when a company is not doing so well they will probably look to bin some expensive contractors rather than permanent staff. Not sure why contractors whinge about this - it's the 'nature of the beast' and you get paid more but accept less job security.
> Or maybe that's what they want
Not for contractors.
If a company wants rid of a contractor, it can simply terminate his contract. There might or might not be some nominal notice period, buyt it's rarely very much. Contractors don't get redundancy pay.
If the company just pisses off its contractors to get rid of some, it will lose those who can most quickly get new contracts - that's invariably the best ones, the ones you actually want to keep hold of.
Vic.
"I can devote the spare 5% capacity to looking for another contract. And I can start saying "Yes" to the agents who are forever asking if I might be persuaded to leave before the end of my current contract."
Agents are even more mercenary than you. I have seen this many times with colleagues and contractors I have employed - the agent wants their fee for placing them and then starts looking to move them on after 3-6 months.
Hmm....contractors will often earn twice what the local permies will earn. (Nevermind the guys in India)
Why do they moan at least 3.4* times as much as the permies?
It isn't unusual to see a guy performing a 60k a year perm job and earning 120k a year as a contractor - plus all the nice tax breaks.
*Stats from survey conducted in 2011
hmmm yes and no.
They do get more up front (although I have never seen 2x and i've been on both sides of the fence)
but they don't get holidays, sick leave, maternity/paternity leave, insurance, pension etc.
I contracted for 8 years and I always avoided holidays because I would mentally be calculating how much it was costing me for the holiday and lost wages etc.
I did enjoy contracting but once junior came along it was hard to risk not having guaranteed work :(
> I contracted for 8 years and I always avoided holidays because I would mentally be calculating how much it was costing me for the holiday and lost wages etc.
I do the same and I'm only 3 months in to my first ever contract after 12 years as a permie (and with 2 young kids - such is life, not many choices open for me...). Anyway, I just factored that in to my expected earnings for the year before accepting the contract (not that I had much choice in the matter, but it sets my expectations, at least) - i.e. assume a day rate of whatever and multiply up by the number of work days your typical permie works in a year, allowing time off for holidays. I don't expect to go on 5 weeks of holidays this year, so anything more is a bonus (or I'll get ill and wipe out the advantage as I naively forgot to include that in my calculations!).
You should be factoring your equivalent annual income based on 48 weeks at your rate (that's the norm when calculating annual salary as far as I can tell).
Also, you should be working your nuts off to save at least 3 months worth of bills/mortgage etc. for when you are out of contract - preferably 6 months...and don't touch it unless you need it!
Ordinarily that would be 2p worth, but since I'm a contractor you can send me a cheque for £3,280 please, plus 20% vat.
"Or maybe that's what they want - when a company is not doing so well they will probably look to bin some expensive contractors rather than permanent staff. Not sure why contractors whinge about this - it's the 'nature of the beast' and you get paid more but accept less job security."
The rehires were taken on at roughly the same rates they had been paying the contractors that left....BEFORE the rate reduction. In the meantime the only people that suffered were the company's own user base, until finally they agreed to increase the headcount of contractors in order to get the work done. So who actually suffered? The people making the money that paid the IT department.
Didn't see if this in England only. If they are doing this in the US then they are stupid as usual. The hiring market is really picking up again (recruiters bothering coders again). Wage cuts generally aren't the best way to keep your already over extended work force and considering in most companies I have seen contractors do most of the work while the regular employees are in political meetings all day it probably won't help the bottom line in the long term. But then again when your upper management spends over a billion dollars on Palm and then gives up on in a few years and gives it away for free the long term isn't that bright any way. Thank god for the ink I guess.
are the same folk who write the worthless software for HP printers, I hope they all walk.
HP is also pushing the hardware business almost entirely to resellers. The SMB shop is given almost entirely resellers now, with nothing available on the HP website - direct order. Only the braindead use the junk they sell through Home-Home office. HP used to sell robustly reliable workstations and business PCs. In this current HP environment, I can't imagine any IT enterprise purchasing HP anything. One does imagine that they could somehow make a buck from their disappearing_as_if_by_magic printer drivers - perhaps a new TV IT reality show on the order of Candid Camera.
Seems like the new CEO is making all the right moves to hurry them into receivership. Obviously running an online flea market would be the right training for an HP shuckster.
I quit my not very satisfying only just rewarding enough job, sold my house and moved to France.
Senior management were shocked at my resignation, but I quit on favourable terms and still do a bit of work for them remotely.
That was just over a year ago & Ive no regrets, would have done it sooner if I could.
...today.
Because until they find another spot, they don't get paid anything.
So they will quietly circulate their CVs and move somewhere else.
Be clear this is not going to save HP any money over (say) the next year, because the contractors will leave as the market rises and HP will need to pay the newer higher rate.
Hiring a contractor has lots of costs, not least it takes time to get them set up, for them to learn the way things are done at this particular site, some tools they may not have seen before, etc. That cost has already been paid for those on site, but replacing outgoing staff ,contract or permanent has a cost.
So why is HP doing this ?
HP isn't.
Some mid level manager has found a way to look good to his boss, there is a clear cost saving up front and the general hit to productivity is too spread out for the 2nd raters who run HP to spot. The guy who came up with this idea isn't doing good for HP, he's doing good for himself.
HP's share price is in structural decline, pretty much anyone who cares knows this.
I don't understand how this has generated so many comments.
Contract is offered a 5% reduction in rate as off next month, they decide whether to take it or go elsewhere.
I know someone that starts a new role in London soon on more money, it didn't take them long to find something and they won't be taking the 5% cut.
Plenty of other contract around - don't like it? Leave. That's the message that was given to Lloyds full time permies last year and I left - to join HP! :) I've since found a whole wad of contractors on double the daily rate that I'm on because of my so called benefits. Contractors rake it in and they know they do so take your 5% cut (285 a day from 300 a day, hardly drastic) and shut the f*ck up.
All this "I'll work 5% less" - if you're a proper professional (and MOST contractors are) then you want to do a good job so don't give me that bull either. HP carry too many contractors and are hiring about 400 FTE's in Scotland alone so believe me, you won't be missed.
Me and one other contractor were given a similar choice, but with a 10% cut, 2 years ago.
Luckily for me they asked him first, he tried to play hardball and he got the chop - I didn't risk it.
A couple of month's later he had to come crawling back.
Only now have they started to cut into the tumorous mass of managers that's choking the company,..
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