Is the IT Fixed Term Contract Market Dead?

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Is the IT Fixed Term Contract Market Dead?

  • Publish Date: 9 months ago
  • Author:by Andrew Clarke

There have been some challenging times for contractors over the last few years, with a recession, a pandemic, IR35 reform and, Brexit having an impact on everyone’s working life.

Good contractors are always in short supply, and as such usually dictate the market when it comes to rates and working remotely. Attracting candidates is a challenge many companies are currently facing, so looking at alternatives to Fixed Term Contracts (FTC) will help bring in IT professionals quickly, should that be for a project or a longer-term need.

Let’s look at some of the differences between an FTC and a Day Rate Contract, and why the latter is more attractive to a candidate.

Salary

Contractors in the IT world usually know their worth and having built up their technical skillset over a number of years, are able to demand a high daily rate. Should contracts be outside of IR35, candidates can be paid via their own Limited Company (most attractive to candidates) due to the financial benefits to them. If the role is Inside IR35, most candidates will be paid via an Umbrella company, or they can come onto The ONE Group’s payroll as a PAYE employee (2nd most attractive option).

A FTC rate is based on a permanent equivalent salary, usually paid monthly like a normal permanent employee. IT contractors have become accustomed to a high daily rate and 9 times out of 10, the FTC salary doesn’t come close to a contractor’s earning potential on a daily rate.

Security

The truth is, although sometimes a FTC can lead to a permanent role, there is no security or guarantee that this could happen. In a busy job market, with many permanent roles offering commitment to a candidate, thought needs to be given to why a candidate should take your FTC, over a permanent or day rate contract. A short notice period is often given with both an FTC and a Day rate contract, but with the latter, the candidates' compensation is significantly more than on an FTC basis. 

When do FTCs work in the IT world?

One time when FTCs can be attractive to a candidate is when it’s an entry-level role, and no previous experience is required. Candidates looking for their first role in IT are usually the most flexible and therefore are more open to taking a Fixed Term Contract to gain some commercial experience and improve their technical skillset. Similarly, some university courses offer a ‘year in employment’ between the 2nd and 3rd year, so if you’re open to a year’s support from a student, an FTC could be a great option for both parties!

Summary 

The above is focussed on the IT market in Cambridgeshire. FTCs may work as a great option in other job functions/locations, but with the competitive nature of the IT market in Cambridge, and the high daily rates available, FTCs are a much harder sell to experienced candidates than a day-rate contract or a permanent option.

Candidates have become accustomed to high day rates, or the security of a permanent position, whereas an FTC often doesn’t offer either of these. FTCs can be great in other markets, or at the junior level, but when looking for an experienced hire, a day-rate contract, or permanent position is often the way forward!