Royal Bank of Scotland has implemented another 10% rate cut for thousands of contractors globally, announcing the move on Thursday – the day before the long Easter weekend.
On 17 April, RBS told all its contractors globally across the group that it would be implementing a unilateral 10% rate cut and that they have a week’s notice period in order to decide whether to accept it, according to sources close to the situation. This means that any contractors deciding against taking a pay cut will leave the organisation by Friday 25 April.
The 10% rate cut takes effect from 19 May for all contractors. Exemptions include anyone earning less than £250 a day and those supplied by consultancies. At the end of 2012 (the latest figures available), RBS employed 10,900 temporary staff.
An RBS spokesperson commented: “We continually keep costs under review, in reaching this decision we have taken into consideration market day rates and those across the banking industry.”
RBS follows Barclays lead by cutting contractor rates at a time when the job market for temporary staff has been picking up. Barclays cut pay by 10% for all contingency workers in the UK and U.S, with some contractors simply refusing to accept the cuts and walking out.
Both banks employ huge teams of contractors across technology and change management functions, so cutting pay is an easy method of controlling costs without making further headcount cuts.
The vast majority of investment banks rolled out 10-15% rate cuts for contract staff in 2009 and again 2012, so pay has fallen a long way since the financial crisis. RBS was already rumoured to be among the lowest paying banks for contractors, and risks an exodus of staff by cutting rates when other banks are keeping pay steady.
In December 2013, after another system crash that left over 1m retail customers unable to withdraw cash or pay for goods, RBS admitted that it had scrimped on technology “for decades” and would need to invest hundreds of millions upgrading its systems. It was suggested that the bank was willing to pay more to convince vital contract resources to stick around.
However, sources suggested that Edinburgh-based contractors were being laid off and that only mandatory IT projects were being given the go-ahead.
One IT contractor affected by the latest rate cut tells us that he accepted a lower rate in return for a longer contract: “What hurts is I took this contract at a reduced rate in the first place on the pretext that it was a one year assignment. Now, after three months, this rate cut is imposed.”