The worst treated group of people in all of finance? Or the best?
European banks have got a new bete noir. It's not the "ugly ducklings" of Tidjane Thiam's nightmares, it's their contractors. That legion of hired guns on £500+ ($647) a day who work on short projects and then saunter out the door to work for rivals.
Deutsche Bank was the first to get the contractors in its sights. John Cryan's 'Strategy 2020', announced in 2015, involved cutting 6,000 external contractor positions across technology and operations. Cryan was clearly onto something; this week, Credit Suisse and Barclays took aim at contractors too.
On Wednesday, Credit Suisse CEO David Mathers told analysts the bank is trying to minimize job losses among full time employees as much as possible: they're "protected." Instead, it's contractors and consultants are being cut. Today, Barclays' CEO Jes Staley said the bank plans to hire 2,000 new technology employees over the next two years. Barclays has decided that technology is a "core competency", said Staley: it wants to bring its tech people "in-house".
If you're a contractor in banking technology, this means that the bank you work for will be trying hard to persuade you to join full time. As the leader in this field, Deutsche has already coined its own vernacular for the process: it's called "internalisation." In the past two years, Deutsche has "internalised" 1,900 contractors. 200 were internalised in the last three months alone.
What if you're happy as a contractor though? In this case, banks have ways of making you comply.
The most commonplace is the non-negotiable rate cut. Employed by most banks over the years and by Morgan Stanley and Credit Suisse in 2016, this involves a sudden reduction in pay by 10% mid-way through a project. Most contractors suck it up ("You shouldn't throw your toys out of the pram midway through delivery, it's not good form," says Paul Bennie at IT recruitment firm Bennie MacLean). But it might make them think twice about remaining in contracting if permanent positions are offered instead.
Ostensibly for tax reasons, London banks also put a limit to the amount of time contractors can work for them becoming employees. "It's called tenure," says Kamal Jain, a technology recruiter at Hudson. "After 18 months to two years, you either have to become a permanent employee or find work somewhere else."
In this sense, therefore contractors are powerless. They can't protest the sudden cuts in their pay and they can't carry on working somewhere in a footloose and carefree fashion if they outstay their welcome. As the new most vilified people in banking they have good reason to go in-house.
Except, the contractors we spoke to seemed perfectly happy with their lot. "The contractors here get treated very well," says one senior technology banker and recently ex-contractor we spoke to. "They know there's these cuts in pay and sudden requirements that you take two weeks' holiday at the end of the year to keep within budget, but that's all part of the lifestyle." Another contractor at Deutsche Bank said he hadn't been asked to go in-house and had no intention of doing so anyway: "I have no intention of accepting internalisation." By increasing technology project work, Brexit has increased openings for IT contractors, he said: "There are loads of possibilities for work, all across the EU."
So, how can banks persuade their recalcitrant contractors in-house? Bennie said carrots are more often used than sticks: "If you're a contractor with a niche skill-set, you usually ride the cycle of activity but if demand for you skill wanes you may have to spend some time out of the market and pay for yourself to be retrained. If you go permanent, banks are effectively offering to retrain and redeploy you internally without that period outside the market. They're only converting the brightest - they're effectively saying you're the sort of person we want onboard."
There may be pay inducements too. Contractors usually earn a hefty premium compared to permanent staff. Bennie says internalised contractors won't be paid more than existing permanent employees, but that they're often paid at the top of the permanent pay range. So maybe being a contractor isn't so bad after all?