To think that contractors in the public sector should have their pay capped?

[DivingBell]

I know this is going to be a contentious issue. I am not a troll...Shiney and her penguins, Oxo Tower, etc (although how this disproves my trolldom I don't know!).

Someone I know has always worked in the public sector. He's quite senior (mid-director level I suppose). A few years ago he decided to go self employed and now contracts in various local authorities. He has just realised (I know!!) that his current employer pays him an hourly rate, rather than his usual day rate, and that over the last 5 months he has been there he has accumulated well over £120k.

Understandably he is over the moon and is wanting to work there for as long as possible (and work as many hours as possible). But it just sits slightly uneasily with me. I am (usually) all for free enterprise, but bloody hell! I guess to me it feels a bit like getting a builder in to do an extension - you want to pay a fixed price, rather than a day rate as you know they will draw the job out for as long as possible if it's the latter. I do also understand that contractors will always command a higher figure than permanent staff, as they don't get all the usual benefits with being employed.

With all the current cuts in public sector, is this individual really worth in excess of £250k per year? Knowing him as I do, I actually seriously doubt it.

So, aibu to think there should be some kind of cap on contractors' pay, so that they are paid an appropriate amount for the job they are actually doing?

We live in a free market economy, so he presumably gets paid market rate.

Note that this does not prevent the council, or anyone else, from making stupid decisions, which they may well have done.

Whether they are paid an appropriate amount for what they are doing is down to the individual contractor and employer to negotiate, surely?

One just has to trust that public sector organisations won't pay exhorbitant rates when they could have negotiated lower, or found someone cheaper to do the same job.

It's supply and demand, isn't it. If they could find people capable of doing the job for less, they would. Anyone who's in charge of a budget will be under a lot of pressure to cut costs wherever possible, so if they didn't need him, they wouldn't be paying him.

I work in a company that pays similar rates for contractors. It's not that unusual in the IT world.

The higher hourly rate may still prove cheaper for the employer though - no NICs, no pensions contributions, other fringe savings and no commitment to providing a full/indefinite career.

Now, if they are so incompetent that they are not managing their contractors and their work rate / output properly, then yes their could be waste. But ere would be similar waste by having underperforming employees.

The issue isnt whether the pay should be capped, but whether the council are paying a fair market rate.

I know someone who works as a painter and decorator and his usual rate for private customers is a quarter of what he gets from local council work. They pay four times the going rate for gardening contractors, plumbers and electricians too, not because they negotiate that, but just because thats what they pay. That is ridiculous and points to bad organisation and decision making at local council level.

I dont hold it against the contractor, I would be happy too if I were him.

The nhs can't source a box of crisps from the cheapest supplier, why in gods name do you think one of the public sector agencies actually cares enough to go as far as capping wages?

"They pay four times the going rate for gardening contractors, plumbers and electricians too, not because they negotiate that, but just because that's what they pay."

Well there's your problem isn't it? Incompetence.

Oh Christ, I'm going all Daily Mail, aren't I?

The amount of money wasted in local government is unbelieable, i know i used to work for them. The more incompetent you are the more you are promoted

I don't begrudge my friend what he is earning, and I absolutely understand why he would want to rake it in on this contract. He has had his barren times, where he has been out of work for several months.

I suspect it's sheer incompetence. My friend hadn't realised he was invoicing them (done through an agency) based on his hourly rate; he thought it was his daily rate. I rather suspect his employer thought that too.

My DH is an IT contractor.

What your friend is getting paid is very much at the top end of the scale, but then he is pretty senior.
The public sector can't pay less than banks, insurance companies, FSTE 100, otherwise they wouldn't get anyone decent to come and work for them.

I'm a contractor for the public sector. Yes I get paid a better hourly rate. But I don't get a pension or any other perks and I don't get paid holiday. Or mat leave. I have to have my own insurance and stand alone if anything goes wrong, no back up from the council. And they could get rid of me with no notice at all. Hence the extra hourly pay.

Have come across this as well, in fact its one of the reasons I left the job. The contractor in question earned similar fabulous amounts, despite his skills being out of date and not having a degree. I earned around one eighth as much, and it took them a year to fill my job when I left.

I think the problem with a lot of public sector contractors is that they are seen as being a reasonable alternative to directly employing staff, either permanently or on a short term contract. If you need a piece of work doing, you have to pay the going rate so perhaps a more realistic solution would be to cap the length of time that a contractor can be employed by an organisation before they have to take a mandatory, minimum length 'break of service' type break.

I work for a charity and see an awful lot of this - the longest running contractor we have was here for 7 years. Capping time served might help to promote direct employment, which reduces costs for the organisation and also helps to keep the job market afloat. Yes, there will always be very short term, specialist projects requiring a certain skill set at short notice but that is unlikely to breach a time served rule.

From what I've observed public and quasi public organisations use contractors too much - either because of confidence or lack of in-house skills, and in some places they don't have the skills to manage them properly either. I'm sure sometimes v high rates are required to do a job in the short term - then I think it's fine. I do think there's probably consultancy used unnecessary or for too long though.

Companies do take the piss - my DH was managing a contract and happened to have knowledge of the programming used - and instantly saw the contractor had been utterly fleecing public sector, and devised a quicker way of doing the job in about 15 minutes.

The UK has a problem with the public sector. When random so-and-so's get paid more at a Local Authority than the Prime Minister for leading the freakin' country... you know it's bad.

DivingBell I suspect it's sheer incompetence. My friend hadn't realised he was invoicing them (done through an agency) based on his hourly rate; he thought it was his daily rate. I rather suspect his employer thought that too.

Woah! That's a whole different issue - if they agreed a day rate and he's invoicing them that per hour at best he's going to have to give it back when they realise and at worst they'll charge him with fraud.

'The public sector can't pay less than banks, insurance companies, FSTE 100, otherwise they wouldn't get anyone decent to come and work for them.'

Rubbish. Wages in most jobs are lower in the public sector than private.

The issue is that councils have to look for ways to save money ad outsourcing to contractors is quite often seen to be cheaper than employing staff to actually do the jobs in-house - sometimes it does work out cheaper, sometimes not. And a lot of contracts go to 'friends' of senior staff, 'jobs for the boys' as it were. But this is my experience.

And comparing public sector wages to the PM is stupid when the PM's wages don't include their perks. Tony Blair earned nearly £20m last year for example.

I don't think it's just public sector who have highly paid contractors on contracts for years. I've seen large corporations doing this as well - with them, it tends to be a budget pot issue: perms are opex, contractors are capex, city likes to see opex costs low so often you get mad situations where most of a depts longer serving staff are actually contractors, just to keep the money in the right pots. (Disclaimer:not a financial bod, this is just how it's been explained to me).

The rule of thumb I was told was for permanent staff members' full cost to the company, double their salary. A contractor can cost more per hour than a permanent staff member & still work out cheaper as they get no holiday, sick pay, redundancy, maternity/paternity, they're paying their own NICs, company tax etc.

None of this is much consolation for those like the poster above working with a less competent contractor on 8x the rate. There are plenty of chancers out there.

Mostly men though. Have been sat with a bunch of male contractors at lunch & suggested I might go contracting - they all rushed to assure me that it wasn't suitable for a woman . Yeah, I bet it's not.

makemineabacardi Wages in most jobs are lower in the public sector than private.

I'm too lazy to google, but I'm pretty sure that's not true post-Credit-crunch.

The issue is that councils have to look for ways to save money ad outsourcing to contractors is quite often seen to be cheaper than employing staff to actually do the jobs in-house - sometimes it does work out cheaper, sometimes not.

A sizeable part of the reason why it is cheaper for them to use contractors than employ people is the generous pension arrangements, along with which come huge liabilities for the government (= you and me) compared to to the private sector where it's largely up to the individual.

....the Local Government Pension Scheme.... analysis indicates that the deficit has more than doubled since 2010, breaching £80bn, leaving LGPS management teams and their actuaries scratching their heads as to how to avoid significant contribution increases. That's EIGHTY BILLION POUNDS. Which is as much as the HS2 rail project that everyone is wailing about, except that we WONT GET ANYTHING FOR IT, it just gets the LGPS back to square one.

And comparing public sector wages to the PM is stupid when the PM's wages don't include their perks. Tony Blair earned nearly £20m last year for example.

Just to be clear, Tony Blair has not been the Prime Minister for a long time.

Penny, I think it's the agreement come to between the LA and the agency. I genuinely don't think he is committing fraud.

I'll keep my fingers crossed for him!

Non-permanent labour rates are determined by market forces, not individual organisations.
However the public sector could reduce its reliance on NPL by performance managing, supporting and recruiting permanent staff more effectively.

But noone likes to performance manage employees properly, it's time-consuming, can be unpleasant and it isn't valued or rewarded. The big boys would prefer to be sitting in high flying director meetings than doing performance reviews or interviews.

So the reliance on more competent NPL continues (not surprising they're more competent as they're usually paid more. It can be a great motivator to be earning six figures).

makemine - there is a huge difference between paying an external contractor a high rate and employing someone.

Traditionally public sector employment was seen as a gravy train secure, good pension and other benefits, you basically had the job for as long as you wanted.
That is no longer the case across the vast majority of the public sector, and until they adjust payscales that will attract skilled and qualified workers in from the private sector now that the pension set up is no longer so favourable, a lot of contractors are being used to fill gaps in skill sets.

Binky the contractor wasn't fleecing anyone, he was doing the job he had been hired to do. He was hardly going to change the process and do himself out of work, was he?
Your DH did his job, which was to improve process and cut costs.