IT contractors earn more by opting out of new law

IT contractors can get higher hourly rates by allowing employment agencies to charge fees to companies who want to hire the contractor on a full-time basis or hire the contractor from another agency.

This indicates there could be a shortage of skilled tech contractors and thus the agencies - not the hiring companies - have the upper hand in jobs negotiations, according to one accountancy for IT consultants.

To allow the agencies to charge fees for 'temp to perm' and 'temp to temp' positions, the contractors must opt out of a new regulation - called The Conduct of Employment Agencies and Employment Businesses Regulations 2003 - that does not allow agencies to automatically charge the hiring companies in these situations.

A recent survey of 83 IT consultants shows that the vast majority - 63 - would choose to opt out of the regulation for the right assignment. Just 12 of the respondents said they wouldn't opt out, while eight said they weren't sure what they'd do.

Opting out increases the chance that agencies will charge higher rates for a contractor's time from clients.

The survey was conducted by JSA Group, an accounting firm for IT consultants.

Barry Roback, CEO of JSA Group, said in a statement that this situation is largely dependant on market conditions: "When there are shortages of well-skilled contractors, agencies will find themselves in the driving seat. At present, market forces are moving in the agencies' and contractors' direction, but it would be unwise to think that these conditions will prevail for the foreseeable future."