Depressing rates by bringing in cheaper foreigners

From the Times Online:

Tens of thousands of foreign IT workers are being sent to work for their companies’ subsidiaries in Britain, sparking fears that British workers are being denied job opportunities.

Almost 30,000 non-EU technology workers entered the country under so-called intra-company transfers last year, with the overwhelming majority coming from India.

Most of those arriving came for low and mid-level IT jobs where there are not significant skills shortages among British-born workers, fuelling suspicion that British workers are losing out to foreign workers who are being paid lower wages.

This has been going on for years and is quite prevalent in the IT industry. It affects mainly the contract and temp staff whose value to a company is for a temporary resource to help with varying short term workloads or to provide expertise that the company does not have currently.

The reason why companies do not employ new permanent members of staff (perms) under these conditions is that often the costs of permanent employment is much more than the contract staff when you take into account of pensions, health, training, sickness cover, paid holidays and other hidden intangible costs.

Which is why sometimes perms look at the contractor’s hourly rate and think they contractors are overpaid. What perms fail to understand is that out of this hourly rate they have to pay employers NI, employees NI, business costs, often IR35 and S660 applies, indemnity insurances, executive pensions, training costs and membership fees and of course, make cover costs of being out of work and ill. The costs incurred by the perms are normally paid for by perm’s parent company and are part of its operating costs.

Funnily enough, as they are only paid for turning up to work, contractors aren’t often as sick as perms! :)

A rule of thumb to compare equivalent salaries and rates is to take the hourly rate (say £30/hour) and times it by £1,000 to get the equivalent permanent salary of £30,000.

So there is an attraction to keep contractors on for cost purposes and sometimes political: I know of one major company that prefers to employ contractors rather than perms because the headcount numbers are smaller.

Back to the main topic: it is impossible for morons like Phil Woolas to say that we’re protecting British jobs and we have checks in place to stop abusing this system, because companies have been abusing this system for years, importing cheap labour from abroad and depressing contractor rates.

One way companies do this is to advertise a job way, way below market value so no-one applies for it. They can then say “we advertised this job, no one took it, it must be a skill’s shortage” and then bring in Cap Gemini or someone who supply the cheap labour through the ICT system.

Another way I have had personal experience with is that a company finishes a project, sacks a load of perms saying times are tough, creates a subsidiary company in India, starts up another project, and brings over cheap labour internally.

As I said, no-one cared about the IT industry – it was full of boring geeks. However, now this practise occurs in many other industries, such as Finance, Oil & Gas, Medical and all of a sudden people are starting to wake up.

I left contracting behind many years ago and now work B2B with my own company, but government and EU are still destroying a very important part of our wealth producing economy and I hope to see this Labour government, who instigated most of the above, being completely wiped out in May.