back to article BP snips IT contractor rates

BP is telling its 900 IT contractors to take a ten per cent pay cut or find themselves new jobs outside the company. The oil company, which racked up £6bn in profits for the last quarter, said that it was writing to all its IT contractors asking them to accept the cut. A spokesman for BP said: "We're extremely keen to see the …

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Paris Hilton

BT or BP?

Or have BT started commenting on BP's recruitment strategies?

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Unhappy

First - Yeah, right

excellent, another short sighted company slicing contract rates.

Will my fuels bills drop by 10% now?

Oh no, they'll remain the same (or higher) and BP will wonder why contractor productivity has dropped by 10%

No doubt they've already asked the cleaners, caterers and other suppliers to take a similar drop.

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Dead Vulture

Really?

"Cutting contractor rates is a common way to cut labour costs instead of making people redundant. It runs the risk of irritating all your staff rather than just upsetting the people you lay off"

Really?

So you reckon it's better that permanant staff sit around wondering if they will lose their jobs (and maybe everything they own) than some highly paid temps getting pay cut?

mmm let me see.....

If your a contractor you should be prepared for layoff and paycuts, it's the nature of the job.

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Anonymous Coward

If contracts allow it...

Presumably they can only do this if the contractor has signed a contract that allows the client to dismiss the contractor. If there's no termination clause, the contract is binding and the contractor can tell them to get lost.

In my last contract the client normally had a termination clause. I had it removed, and they were OK with that. When they later told all contractors to take a pay cut I said no. They told me I was out, until I pointed out they were bound to give me the work at the agreed rate until the contract ended. Naturally, when the contract did end there wasn't a renewal, but since I hated the work and wouldn't have renewed anyway that wasn't a big deal.

If you sign a contract that allows the client to push you around, expect to be pushed around.

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BP or BT?

"A spokesman for BT said: "

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Oh the irony.

I’d be extremely keen to see the benefits of the cost of oil falling from $150 to $35 a barrel - I'd like to see the benefit of that.

Oh right that might effect their £6 billion pounds profit!

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Falling or Static?

As a long-time contractor, although not in the oil industry, I have not seen any rate increase for about seven years so the thought of taking less is disturbing. This smacks of HR taking advantage of the panic over the financial situation and blackmailing their workers by threats of replacement.

It would be good to see contractors acting in unison for once and standing up to this but I have in the past found that someone will do it for less, either from necessity or sharp-practice. It's very difficult to get more once you have accepted less.

Rob.

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Alert

Erm... what?

"Cutting contractor rates is a common way to cut labour costs instead of making people redundant. It runs the risk of irritating all your staff rather than just upsetting the people you lay off."

I don't see how. In fact, most of the permies I know would be very happy to see contractors' rates reduced by 10%.

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Anonymous Coward

Presumably they're paid in pounds sterling?

I assume their contracts are written in pounds, so as the pound heads down they're getting less and less value for those contracts anyway.

Pound is headed down (that Bank of England 'quantitative easing' will drive it steadily downwards).

On the other hand, the best and the brightest of them can look towards Europe, particularly the Eurozone. That's the thing about flexible knowledge based workers, the best of them can simply go work elsewhere.

Have a fun look at this chart, Zimbabwe vs US dollar, they printed money to pay their bills too, a la 'quantitative easing':

http://en.wikipedia.org/wiki/File:ZWDvUSDchart.GIF

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Unhappy

Contractor rate cuts

...& of course, they will be quick to react by putting the rates back up within existing contract periods when inflation is +ve again & market rates have increased. Not.

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Joke

..BP

dont blame BP.. £6bil a quarter just isnt worth getting out of bed for....

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Thumb Up

Price cuts then?

"We're extremely keen to see the benefits of deflation"

So are we - I assume the 10% cut in call charges and line rental will be back dated to the start of the financial crisis?

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All those profits...

and their STILL intent on shitting on people.

A 10% cut for around 900 contractors must REALLY make a BIG impact on the profits / dividends.

Be interesting to see how many opt to tell them to ram their jobs either now, or when things pick back up again.

And just how much of a performance decrease they'll get from these guys.

Makes me sick.

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Thumb Down

Eh?

The price of steel has fallen sharply so IT contractors should take a 10% pay cut. That would only make some sort of sense if all IT contractors spent their salaries on was steel stock.

Maybe you could read it this way: "When metal prices were rising sharply we thought we were being very clever signing up to fixed price contracts. Now the price has fallen below that we want out of the contracts, however we know we probably can't renegotiate so we'll cut costs elsewhere so that the shareholders don't have us sacked."

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Flame

We're extremely keen to see the benefits of deflation

I wonder what would happen if I deducted 10% from my next BT bill, with that quote ?

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Happy

What cobblers...

"Cutting contractor rates is a common way to cut labour costs instead of making people redundant. It runs the risk of irritating all your staff rather than just upsetting the people you lay off"

It certainly doesn't irritate all the permies who've not been raking it in over the past ten years.

Contractors are supposed to be temporary labour so why should anyone cry when they are the first to suffer?

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Unhappy

Whole industry

It's not just BP's IT boys either.

Across the board any contractor in Oil & Gas is looking at losing out - most of the big players have announced that their contractor rates are being cut. "If you don't like it, get to f*ck" is pretty much the feeling here.

Where I work has just announced a series of job losses. All expat staff are being brought back as well, with the view of them being integrated* into the office.

Staffies aren't safe either. Seems the goldfish at the top have completely forgotten how much wonga they made last year when it was $150 a barrel and are just going "But it was only $40 a barrel in December, sob sob"

*Read Taking someone elses job or being made redundant.

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Coat

on the other hand...

...when the price of steel (for example) rises BP will be happy to pay 10% over the contract price.

Mines the coat with the amazing flying pigs in the pockets

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Coat

I am lost here.

A spokesman for BP said: "We're extremely keen to see the benefits of deflation and we're looking at contracts throughout the supply chain - not just in IT. For instance the price of steel has falling sharply - we'd like to see the benefit of that."

Ok, probably I'm dumb but I don't understand what the hell this idiot is blathering about. Really, what the hell is he saying?

Steel is always steel and will always be the same steel of yesterday. The same steel you buy tomorrow will be made out of the same metals of the steel you bought yesterday and it will be produced with the same techniques. The price rises and goes down only in regard to the introduction of new tools to extract the iron and to create faster and safer foundries to produce it. Oh yes, and the fact that more steel is being bought and sold on the market.

Human know-how, instead, expecially by outside contractors who are expert in your technical domain, is something that grows, and it grows with time and hardships. When you risk contractors leaving your company, expecially if you have IT projects going into production or when you need people to do on-site support for your operations, you have all the hidden costs all popping up suddenly,made of delays, mistakes and important pieces of your workflow suddenly forgotten because you told GTFO to the only person who knew them.

But please, disregard my comment.

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Anonymous Coward

Lucky

Contractors, think yourself lucky to have a job at all! I'm a permanent employee in IT, my employer has laid me off without notice, without pay, indefinitely. And it is legal. This is an area where employment legislation is weak.

It's beginning to look as if it is a dirty trick to push some of us out the door without having to give us a redundancy package.

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Anonymous Coward

Contractors don't get made redundant -

they just don't get their contracts renewed.

If cutting contractor pay stops permanent staff being made redundant or taking pay cuts, then I'm all for it.

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Anonymous Coward

BP

I was on a BP IT Out-Sourcing Contract in the 90s. BP was abusive even then.

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Flame

Blatant Profiteering

Bastards, the lot of them.. They are making record profits (they keep managing to outdo themselves each year) and they expect IT workers to just accept this? I wonder if any of those huge databases of oil deposits will suddenly take up a lot less space on the server, I wouldn't blame anyone if this happened.

Flames, because, well...

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lucky for BP they have a license to print money

Thank goodness it's many years since I was in the contract programming biz, This is spectacularly poor management, typical of bean counters with no understanding of what they are buying.

Given that programmer productivity can easily vary by twenty to one, chances are this announcement to all contractors that they are an interchangeable commodity like crude oil, will probably cause the ones worth ten of the others to quit, and the rest to slack off by an unmeasurable 20%. But "savings" will be achieved. I suppose BP management are now going home to tell their wives they are to be replaced with 10% cheaper models "owing to the current economic climate". Sounds fine in theory, but it's not going to help.

http://www.devtopics.com/programmer-productivity-the-tenfinity-factor/

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Anonymous Coward

So What?

Why all the talk / panic about cutting contractors rates - so what? - if you're any good you can just take your services elsewhere. HBOS tried it on last year (and i can now see why) and were left with all the dross - four of my us left and found alternate contracts within weeks. Anyway, the more these companies merge / demerge systems the more work there is for IT going forward. Lets not feel sorry for ourselves - if you want security, go be a corporate droid. if you want the benefits of being a contraftor, remember that the lack of security is reflected in you pay rate.

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RW
Thumb Down

Deflation? Surely you jest!

Maybe BP is seeing the effects of deflating steel prices, but I ask, are their contractors seeing deflating prices for food and energy? Thought not.

And have BP's higher-ups set a good example by taking, say, a 25% cut in pay & perks first? Thought not. Lying bastards.

I hope all the BP IT contractors down tools, walk out, and leave BP to sort out the resultant mess on their own. "George, this is Ralph at BP. What do you remember about that database schema you were working on before you left? I can't find any documentation."

"Nothing at all. However, a modest payment of £100,000 might loosen the strings on my memory for a few minutes."

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Anonymous Coward

Who?

BP or BT? The article states both.

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Stop

Which? Organisation????

Why is a BT spokesperson commenting on a BP matter?

Simon

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Stop

BP/BT?

Which is it?

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Stop

Smelling mistake

I fail to see what BT has to do with this???? P and T are not even near on the keyboard

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Anonymous Coward

hypocrisy

so why dont they apply the same policy and reduce the cost of fuel at the pumps?

how much has a barrel of oil come down and how much has the pump price come down?

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Ed

LOL

I have to ask, do the cunts who runs these organisations really beleive the crap they spout

Oh we need to cut rates... yeah we made 6B profit but we still need to save money.....

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@Stu Reeves

"If you're a contractor you should be prepared for layoff and paycuts, it's the nature of the job." Maybe so, but since contractors typically are NOT "highly paid temps", and are the most S#it upon part of the IT sector already, a little consideration would be nice.

I mean, it's nice that BP isn't jumping on the layoff bandwagon like so many, and I'd hate to see their $6 billion profit fall any---it'd be horrible if one of the execs' stock price fell and they had to struggle to make a yacht payment or something---but is it really necessary to screw people over when you're making an enormous profit? I'm sure if some of the board took even a 1% cut, it would be possible to not only not cut pay, but give raises to their long-suffering temps.

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Gold badge

I assume they can work 10% slower...

I assume with a 10% cut, I would be able to do 10% less work.

This is NOT smart, one of the things oil companies do is run number-crunching jobs and simulations to determine where to find new oil. This involves large systems, and (IT) staff to keep it running. These are in effect BPs source of future revenue, and the last guys they should piss off!

One tact I'm surprised businesses aren't trying is offering (unpaid) vacation time off. It's effectively a pay cut put keeps things positive by saying they have more personal time. The hours people in the states are expected to work have been steadily increasing for decades (there's still 40 hour a week jobs but more and more just "expect" people to put in all this overtime)... and vacation has been decreasing for years. There's plenty of jobs now that have 4 or 5 holidays and 0 vacation time. My parents work for a university, so they get about 2 weeks off a year, and that's considered super-cushy.

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Anonymous Coward

Let's call them contractors

Perms sends the wrong message, they are really just people employed under an employment contract.

And not very permanent, it doesn't take much to drop someone through redundancy from an employment contract.

And consultants just negotiate their own contract of relationship.

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Anonymous Coward

Contract Termination

Re: Presumably they can only do this if the contractor has signed a contract that allows the client to dismiss the contractor. If there's no termination clause, the contract is binding and the contractor can tell them to get lost.

What planet are you on?

Every contract in existence has a termination clause. By definition they have to. Otherwise the arrangement would go on forever, well at least until the individual dies!

Most termination clauses will be of the form "the service provider or company can terminate this contract by giving the other X weeks notice".

In the last IT recession the investment banks in the city forced their contractors to take a pay cut, if they refused, they'd terminate the contract and issue a new one at lower rate.

So as a contractor you accept the new lower rate forced upon you or it would be terminated, so either way the new lower rate is what you're going to be paid, or nothing.

BP can force a lower rate, why? Simple market economics, there aren't many jobs around now, if you want the same rate then b**ger off a get a new job with that rate - that's your choice as a contractor, if you can get the job. It's nothing to do with BP making reduced profits, or high profits.

Morally it might not be right, but they can do it.

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Anonymous Coward

@AC of 19:58

Agree with you. The good contractors can always get work. I tried to pull out of my contract and they practically handcuffed me to the radiator. If you have skills people want, you can deal. If the company has a bunch of biscuit-eaters as permie staff, then only contractors know what to do and how to do it. If I walked, they would double their costs and get a worse result (or none) and they know it. But, being prudent, I have also been socking away large chunks of my money every month for a rainy day, because being a contractor does mean they can let you go in the blink of an eye.

AC, because it's a big company...

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Anonymous Coward

time to start colluding and fixing prices for contract work/

Lets see how they'd like it if every single contractor in the country laid down a decree that their rates are now 10% higher - they can take it or go through the expense of hiring permies.

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One rule for you, one rule for me

Companies do this, because they can. But contractors who do the same get short shrift.

At my last contract, a change in roll led two contractors to demand a rate rise (or they would leave) mid-contract. They were both sacked on the spot and marched off-site.

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Anonymous Coward

re: Contract Termination

"Every contract in existence has a termination clause. By definition they have to. Otherwise the arrangement would go on forever, well at least until the individual dies!"

No, every contract will have a defined period or expiration date/conditions. That's not a termination clause.

"Most termination clauses will be of the form "the service provider or company can terminate this contract by giving the other X weeks notice"."

Correct, that's a termination clause. Most contracts might have one, and you can ask for it to be removed. If it's removed the contract is binding on both sides until the termination date. I either get it removed, or stack the rate to justify the extra risk that type of clause implies.

"Morally it might not be right, but they can do it."

Only if you've signed a contract that allows it. I presume you're not a contractor, or at least not a very well informed one. This is very basic contract stuff.

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Anonymous Coward

Contractor scum

We get a relatively high rate precisely because if things like this. We know we are likely to spend time not earning just as much as we know some contracts are better/higher paid/more fun / more interesting / less commuting etc.etc than others.

So we put money aside every month until we have enough to allow us to not work for a time whilst still paying the bills (I like enough to cover 12 months worth of bills and "normal" spending myself).

But look at it this way, yes BP are taking the piss and just opportunistically profiteering, but if your rate is high 90% is still a lot and if it is low then you won't lose much. It is also highly likely that you can get your agency to shoulder the majority (if not all) the reduction - it is easier for them to keep you there and it will look better to BP that they provide more compliant, flexible contractors.

I believe most people in that situation would agree to the cut, and still work well enough to be noticed. It may be tempting to tell them to screw themselves but if you end up actually losing more than 5% you are a very poor negotiator indeed. This is the same as 10 days unpaid at the higher rate, which is not that much time to get a new contract.

You can also be pretty sure that if you refuse the cut you will never work for BP again. You might not really want to work for BP again, but hell as a contractor the bottom line *is* the bottom line after all so why would you want to alienate a possible source of future income?

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Get over it

You have a price in mind for your services. If the new price doesn't meet that, then go somewhere else. We've not exactly had a raw deal out of contracting, in the current conditions I'm comfortable with taking a rate cut.

It all becomes a question of expectation. If I'm forced to drop from 500/day to 450/day but with a 100% likelyhood of work for the next 6 months, then that outcome is worth 450/day to me over 6 months.

If I hunt for another contract @ 500/day and estimate there's only a 75% chance of getting one and assume an average of 2 weeks off work, then that's only worth 343/day to me over the next 6 months.

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Unhappy

@RotaCyclic

Typically, a modern IT Consultants contract says something like "The contract will run until <date>, unless terminated early. The Client can give X weeks notice of termination. The Supplier has no right of early termination". The Client in this case is the employer, and the Supplier is the contractor.

These asymmetric termination clauses have been the norm for about the last 5 years.

There is always a debate about whether this is legal, and also whether the employer/Client really wants a seriously pissed-off consultant working in positions of high responsibility, but this is another debate. These contracts may be legal, because it is not an employment contract, but a contract for provision of service.

I applaud the AC who had the early client termination clause removed from the contract. Respect.

Unfortunately, HMRC wants to see contractors as employees regardless of the contract type, so contractors are actually screwed from every angle.

I am currently working for the same rate hourly rate as I had back in 1996 when I first went contracting. But at least this contract is commutable, for the first time in 8 years.

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Unhappy

exbp

As an ex-bp contractor, I can tell you that they were making it very clear that contractors were unwelcome for well over a year now (in the business unit I worked for).

Those of us they didn't drive off by cutting all the benefits (for example free lunches, equipment provision, and even expenses in some cases) and shorter contract renewals (what the hell can you plan if you only get a 4 week contract?) are now hit with less money.

Well, that's the nature of the game for contractors, but I'd heartily recommend staying well away from BP IT jobs, contractor or permanent, for the foreseeable future. Unless you can put up with incompetent and top heavy management (I had 4 managers as I left, all overseeing my single role. No one else was in the team), overblown process (60 man-hours work just to get a person from turning up on their first day to a desk, let alone access to the systems and software they need), and a horrible habit of picking the worst software you can find to do a job. FFS, who in their right mind uses Clearcase nowadays? The whole place was riddled with hidden Subversion servers, just so all three developers could actually do the work that their 15 managers were asking for!

So glad I got out. Even though I jumped to a bank!

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Bronze badge

The bit I like is...

"Enjoying the benefits of deflation", any and every economist will tell you that labour rate deflation is an economic disaster as it reduces the buying power of the consumer without reducing their debt, even if they are highly paid temps, who drive big cars that use lots of expensive BP fuel, that they won't buy any more and so on.

I'd have to say that that statement has to be the most stupid thing I have heard from any spokesman in years and shows BP to be more out of touch with reality than any Politician.

It's simple, the economy works because people want to buy stuff, if you cut their income they can't buy stuff, so you sell less, and have to cut more staff, and so on. You know basic supply and demand.

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