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back to article 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 …

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Silver badge

Heres hoping

Some contractors vote with their feet.

If not now preferably when HP can least afford them to leave. (1 week before go live).

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Anonymous Coward

Whatever happened to an employment contract?

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Facepalm

Based on your comment I can deduce the following:

A. You're not a consultant

B. If you are you never read the actual contract - shame on you.

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Sir

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.

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"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.

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Uhm..what?

Notice period... Notice period... Wait, got it written down somewhere... Notice period....

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Anonymous Coward

"HP has asked some suppliers to reduce costs"

"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.

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Meh

Re: "HP has asked some suppliers to reduce costs"

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.

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Anonymous Coward

@ TangD

If you make sure to apply thread locking compound to the best people, this will help to stop them becoming loose.

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Anonymous Coward

Re: "senior management insist on paying for good enough."

No, senior management insist on paying for "cheap enough", which usually turns out to be "not quite good enough". That leads to more cost cutting the following year, and the whole company spirals down the plughole, printers and all.

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Anonymous Coward

Muppets

"if they want to continue to be part of HP's extended workforce"

Nice IR35 wording there.

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Pint

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.

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Joke

Re: Joe Drunk

15%? Why, when I were a lad, we had t' pay companies t' be able to work f'r them. And we did 25 hour days, walking to work barefoot over broken glass. And we were grateful.

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There's the bottom, and then there's the bottom

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?

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Windows

Re: Joe Drunk

LUXURY!!!

When I were not even born, Ma'd send us down 't pit...(etc)

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Anonymous Coward

Re: There's the bottom, and then there's the bottom

Pay is market driven, if competitors are cutting pay then one can/must do the same to stay competitive while keeping the same profit margins.

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Re: Joe Drunk

Coding uphill both ways...

I remember seeing the Eiffel tower for the first time in real life, driving back in the cab to the airport...

Ah... Those were the days.

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Re: There's the bottom, and then there's the bottom

" 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?

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Easy way to cut costs

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..

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Devil

Re: Easy way to cut costs

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.

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Re: Easy way to cut costs

Manage payroll??? Takes me all of 5 minutes to total my monthly hours and submit an invoice to my clients. Can't see any point in paying a third party to do that, particularly if you're a limited company.

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Stop

Re: Easy way to cut costs

There's online companies that specialise in that that only charge £6/mo for the payroll function of up to 10 people (and I'm sure you can get bulk discounts) - I suspect the agency equivalent cut is somewhat more of a piss-take.

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Anonymous Coward

Re: Easy way to cut costs

@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.

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Re: Easy way to cut costs

@ anna

I think you misunderstood what I wrote. I send the invoice to my agent. My agent pays the invoice. So that means on their side they need someone to do the admin that involves. I don’t pay someone to collate my time and create my invoices.

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Re: Easy way to cut costs

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.

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Anonymous Coward

Re: Easy way to cut costs

"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).

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Re: Easy way to cut costs

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.

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Anonymous Coward

Re: Easy way to cut costs

@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.

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Re: Easy way to cut costs

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.

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Re: Easy way to cut costs

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.

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Re: Easy way to cut costs

Not only that, but we expect to be paid on time every month, whereas the agency may wait 6 months for the invoice to be paid. That does deserve something.

(But yeah, they're still schmucks)

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Anonymous Coward

At the end of the day...

...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.

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Anonymous Coward

5%?

Better than the 10% HBoS pulled back in 2007. Personally unless I'm in a hurry to go I'd take that as it's probably best than the hit of being out of work whilst looking for another contract. Unless you can line something else up sharpish of course ;-)

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Anonymous Coward

5%? If only....

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!

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Cutting costs

If HP needs to cut costs, how much are they cutting executive pay and benefits?

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Unhappy

Re: Cutting costs

@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.

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Anonymous Coward

Re: Cutting costs

I can tell you another thing that kills morale, contractors being paid twice as much as regular employees while by definition being a lost investment of time when they leave and move to new pastures.

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Coat

Re: Cutting costs @ AC 12:49

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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FAIL

Re: Cutting costs

@ AC 12:49

Employers National Insurance, pension contributions, holiday/sick pay, maternity/paternity pay, redundancy payoffs, training costs, maybe share options…yeah, a permanent employee costs half as much!

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This post has been deleted by its author

Re: Cutting costs @ AC 12:49

Won't downvote but the permies I know work pretty hard.

I've also seen many a time when the contract rates didn't cover the CATS rates as well!

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Anonymous Coward

Re: Cutting costs

TBH cutting executive pay and benefits, whilst a satisfying thought to those who consider them over-compensated, wouldn't actually save that much - nothing like as much as cutting thousands of contractors' rates by 5%.

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Anonymous Coward

This happened to me a decade ago

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.

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Sir

If we all did the following it might have interesting results..

Offer of 5% cut made or end of contract.

Counter-offer 5% increase or end of contract.

Solidarity brothers (and sisters).

Worked for me back when I was told 10% cut.

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i work on this basis.....

.....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.

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Re: i work on this basis.....

Terribly unprofessional attitude, I must say

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Flame

Re: i work on this basis.....

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.

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What's the problem?

HP attiutude in our limited time:

If you don't like it, you know where the door is.

And then go and book your flight to India, Bulgaria, China or Vietnam.

Take your pick .-)

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Anonymous Coward

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.

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