This is not a pay cut, this is the contractor having to pay the same taxes as the permie employee sitting next to them. Same job, same taxes. If you like the option to still roam and take up other employment there is nothing stopping you. Perhaps someone will up your rate, from what I see that is not likely to happen. Lots of public sector IT contractors ejected to the private sector, finally fair taxes are catching up with all contractors. Having worked on both sides I think equality of tax is a fair outcome.