Are Your IT Contractor Pay Rates Competitive? They Need To Be.

Tue, Feb 03, 2015 @ 08:30 AM / by Jerry Brenholz

“They were the perfect candidate…had the exact skills…the hiring manager loved them…the compensation offered just wasn’t enough…they accepted a better offer.”

We hear this conversation daily inside our office, sometimes it seems like hourly, and it’s becoming more frequent. Of course we could shut the door, but it’s better to listen and learn. These conversations are a sure sign that the talent wars are heating up. People actively looking are able to be more selective and demand higher pay, and the passive candidates are even harder to connect with and harder to lure away.

What this means for those who hire IT contractors is that it might be time to review your rates. Many companies negotiate pay rates and long term contracts with their suppliers. This can help streamline the purchasing process as well as help keep costs down, especially on items with stable market costs and where buying in bulk achieves savings for the client while allowing the supplier to be successful too.

When it comes to employees though, the market can move quickly, especially in the technology industry. Rates that were negotiated 2 or more years ago may be quite out of date. In some IT job categories this is even more pronounced. If you aren’t offering competitive compensation you are likely losing talent to others, period.

You don’t have to be Google or Microsoft to need good IT personnel; technology is mission critical to almost every business these days from Amazon to UPS to General Motors. You are competing with not just technology firms but leading companies in other industries for the top IT talent. The tide is turning and the worker is back in the more powerful position and no one is immune. At one point in their history, Google gave a 10% across the board salary increase to stop the exodus of employees that were being lured away by higher compensation at Facebook, Apple, and others.

How do you know if your rates are competitive or are holding you back?

  1. If you see IT positions remaining open longer than normal, even when you source from multiple firms, that’s a sign. 

  2. If your hiring managers are complaining about the quality of the candidates they are seeing, that’s another sign that your current rates may not be attracting the level of skill and experience that your IT department really needs. 

  3. If you are losing candidates at the offer stage to other firms, the rates you’re paying may be an issue. 

Your first thought may be, why should I pay more? I can’t fully answer that because each individual business is going to make its own decisions on where to spend or save, what they are willing to, or must pay a premium for. Only you know how badly you need a particular person with certain skills or experience. Depending on your need, you may be willing to pay quite a bit, or quite a bit more than the other guy. There are always tensions between saving money and getting what you want but keep in mind that there can be hidden costs to simply saving money by offering lower compensation.

  1. How much is it costing your company to have that position open?  What work is not being done?  On a multimillion dollar project saving $25,000 dollars (roughly an additional $10 per hour) on a contractor could be very shortsighted. 

  2. The work is getting done? How?  If other department members are covering you are jeopardizing burning them out and losing them. 

  3. Filling your positions with candidates who accept your rates?  Beware of people who will take anything until something better comes along.  Those contractors may be more susceptible to a better paying offer.  It can be smarter in the long run to secure a great IT professional at a rate they like so they stay through to the end. 

We start by asking our candidates what they want to be paid and make every effort to meet that if they are qualified. My feeling is that if someone is happy with what they are making it pays off in many other ways; they arrive on the first day of work happy, motivated, and feeling respected.  As noted above, they are also less likely to leave for another offer. I’m not suggesting indiscriminately paying people whatever, but very often what people ask for is reasonable. When you don’t have to convince someone to take $45 an hour instead of the $55 or $60 they deserve you start off in a better position overall.

We’re here to help our clients. We want to be able to do the best job possible for our clients and find the talented IT professionals they need but it is much harder to do that if we can’t offer competitive compensation. In 1914 Henry Ford revolutionized the way workers were paid by introducing the then unheard of wage of $5 a day and a profit sharing plan. Workers lined up to take on work that had previously been considered repetitive and mind numbing. Attracting, hiring and retaining workers was as much a concern for Ford as it is for 21st century managers. He understood that it took good pay to get and retain the best workers.

Spending wisely is always the goal and if you want to land the top performers, spending wisely cannot just mean saving money and paying the lowest rate possible. It has to also mean paying what you need to get the type of person you need to do the job. Ensuring that your workforce compensation strategy is helping you attract the right talent is a huge competitive advantage for your company overall. Make sure yours is helping not hurting.  

Sticking to the status quo might be costing you much more than you save!

Sincerely,
Jerry Brenholz
CEO and President
ATR International, Inc.

New Call-to-Action

Topics: JerryBrenholz, IT staffing and recruiting, IT contractor retention, Pay Rates

Jerry Brenholz

Written by Jerry Brenholz

Jerry Brenholz is the President and CEO of ATR International. He is an industry leader and active in many of the leading staffing industry organizations.

Categories

see all

Subscribe to Email Updates