HSBC has become the latest bank to impose a unilateral 10% rate cut on its contractors, sparking anger among its temporary staff who have had their pay squeezed in recent years.
The bank informed all contractors working in its markets division in London and Paris of the move on 1 July, according to sources close to the situation, and the pay cut comes into effect on 4 August. Contractors were told that they either accept the new rate, or leave their current position.
HSBC’s decision to cut pay for its contractors is a cost-saving device that has already been implemented by other large UK banks this year. In April, as we exclusively revealed, Royal Bank of Scotland gave its contract staff just one week to accept a 10% pay cut, or leave, while Barclays’ rate cut for all contingency staff in the UK and US in March affected over 12,000 people.
Understandably, the latest rate cut hasn’t sat well with contractors at HSBC. Most feel that imposing a rate cut before the contract is up for renewal breaches the terms of their agreement, but chopping pay mid-contract is far from unprecedented.
In 2008, the vast majority of investment banks cut pay for their contractors by 10-15% across the board, and again in 2012 when firms were still feeling pressure to cut costs. At the same time, banks have also been enforcing mandatory vacations for their contract staff, particularly over the Christmas period when most firms have a code lock-down.
Cutting pay for contractors is an easy way to curtail staff costs without resorting to job cuts – although HSBC is in the midst of a three-year programme to eliminate 14,000 roles globally.
However, contractors often complain of the short-sightedness of rate reductions. The argument is that most contractors work above and beyond their job descriptions with no overtime or prospect of a bonus, but cutting pay reduces their motivation to put in the extra hours, often results in the need to hire more temporary resources and, ultimately, costs the bank more.
HSBC has been streamlining its technology costs anyway, and stated in its annual report that it had “shifted the mix” of software development employees towards lower-cost destinations.
After a period where recruiters told us that contract recruitment was picking up in financial services, HSBC’s decision to follow both Barclays and RBS in curtailing day rates suggests that banks now feel confident enough that pay cuts won’t result in an exodus of talent.
HSBC didn’t respond to requests for comment.