Are You Paying Your IT Staff Too Much?

by on 04/10/2009

hand holding twenty pound notes

More than 70% of IT staff are contemplating taking a job abroad.

This is a serious threat to every company in the UK. Employers of IT staff need to ensure that they are paying appropriate salaries, bonuses and other benefits and that they are fulfilling their IT employees’ job expectations.

Fortunately, Computer People’s authoritative IT Salary Review gives an annual snapshot of the IT job market and enables employers to benchmark themselves. The 2009 review has just been published and this article looks at the review as well as previous versions, reports on key trends and attempts to explain some of the more surprising findings.

FITM partners with specialist IT recruitment companies such as Computer People to provide a managed end-to-end recruitment service for its clients. Please contact FITM for further information.

Introduction

  • Do you pay your IT staff an appropriate salary?
  • Are you going about IT recruitment in the most effective way?
  • Is the attrition in your IT department typical of the industry?

These are fundamental questions which every employer needs to ensure that they can answer positively. Help is on hand as the answer to these and many more questions are to be found in the annual IT Salary Review from Computer People (CP).

The review is the most authoritative and independent survey of IT salaries produced in the UK. This year’s review gathers data from two surveys undertaken in the UK in the third quarter of 2009. The research was done by Loudhouse Research with supporting analysis from the Institute of Employment Studies and Giant.

Since the 2008 review, the country has been in the depths of a recession, and it might be expected that this would be reflected in IT salaries and staff attitudes. However, this is not the case. The review shows permanent salaries increasing on average 3% and contract rates by 12% compared with a Retail Prices Index which fell by 1.3% in the year to August 2009.

The review is a useful benchmark for all employers of IT staff, and to a lesser extent to those outsourcing elements of their IT environment. It acts as a useful tool to compare staff salaries and benefits for specific skills, regions and industries as well as giving broader indicators for employers to consider regarding the recruitment process and how to retain staff.

This article does not attempt to reproduce the CP review, but does highlight some of the information, and in particular comments on key trends. If you would like a copy of the review then please contact Dan Freshwater on +44 (0)121 214 6423 or by email.

Key Findings

Pay and Benefits

2009 has seen an increase in both permanent and contract salary rates. This is particularly marked in London and the South East, where permanent salaries have increased by 4.7% to an average of £41,469 and contract salaries by a substantial 10.5% to £42 per hour.

These increases have occurred at a time when the majority of the labour market has experienced decreasing salaries. Companies have reduced the size of their IT departments, but have rewarded those that remain with higher salaries in return for taking on additional responsibility. In some cases, companies have also turned to the contract market to support mission critical systems and projects. So, less permanent and contract work has been available, but employers have been willing to pay more for specific skills and experience.

Also of interest, especially in financial services, is that 49% of permanent and 11% contract workers reported receiving a bonus this year. The average bonus was £4,227 for permanent staff and £6,465 for contract for the whole country, a rise of 7% on 2008’s figure.

For all staff, benefits have been reduced in the last year. For example, 49% of permanent staff received a contributory pension in 2008 compared with 45% in 2009, and 40% received a health plan in 2008 versus 38% in 2009.

Recruitment Methods

There is a significant mismatch between how employers are recruiting staff and how staff are looking for jobs. For example, employers rank advertising in the national press as their third priority (38%), but for employees this is their ninth priority (12%). Anyone involved in the recruitment process should match their recruitment methods to those used by candidates.

Recruitment Process

The length of time that it takes employers to replace an IT resource has dramatically increased from last year. Employers now wait an average of six and a half weeks with 48% having to wait a month or more. In the past, this would have been increased by an induction period before a new employee was productive, but this has dramatically reduced: this year 40% of companies have spent nothing on induction or training compared with 19% in 2008.

In sectors other than IT, this period without a member of staff has reduced and it seems counter-intuitive that it should have increased in the IT sector with a larger pool of candidates available. What appears to be happening is that employers are looking for experience and the perfect skill set.

Attrition

Intuitively we all feel that work is a less secure environment than it used to be and the review figures bear this out. In 2008, permanent staff stayed an average of 2.8 years at a job compared with 2.6 years in 2009. Contract durations have decreased similarly (from 1.4 to 1.1 years). Interestingly, this decrease in employment duration is matched in other sectors, and has been decreasing for several years. The downwards trend is just starting to slow, and it is interesting to speculate as to where it will plateau – if the trend continued linearly, employees would remain in a job for only a year as early as 2017!

The economic downturn appears to have made IT workers keener to move to a new job rather than keeping them determined to stay where they are. In 2008, permanent workers expected to stay 14.9 months before they moved on and this has reduced to 12.6 months this year.

An incredible 51% of permanent employees and 56% of contractors say that they are actively looking for a job. At the same time, the percentage of respondents who rated job security as either extremely or very important has risen from 62% in 2008 to 84% this year and is now the second most important factor for permanent staff. This is a curious situation: the workforce appears to be seeking more stability by changing job.

Job Security

Unsurprisingly, job security is perceived as low this year, with 30% of permanent staff not confident that their job is secure for the next six months and 68% of contractors expecting that they will have their contracts cut short. Redundancies and staff restructuring are given as the main reasons for this lack of confidence, with IT outsourcing coming third.

More than 70% of IT staff are contemplating taking a job abroad. The main motivators for this are the quality of the job opportunity, the potential to earn more and personal development rather than the lack of suitable domestic job opportunities, although this has jumped in importance from 36% to 47% for permanent employees.

Conclusions

This year has shown a period of turmoil and confusion in the IT job market. IT staff have suffered along with the rest of the economy: bonuses and other benefits have been cut back, employers are taking longer to recruit the right candidate and job duration continues to reduce. However, pay has risen ahead of inflation for both permanent and contract staff.

Job security is a critical factor in retaining IT staff and the UK faces the real possibility of an IT brain drain if they do not perceive that their jobs are interesting, well paid and offer opportunities for development.

Employers of IT staff should compare their IT staff remuneration package to the industry average and make appropriate improvements to ensure that they have the quality resource that they need. This is critical to position their company for the future as the economy moves out of recession in the years ahead.

FITM

FITM partners with a number of specialist IT recruitment companies including CP to provide an independent end-to-end recruitment service for both contract and permanent resource.

Leave a Comment

Previous post:

Next post: