Network: IT Salary Survey - Permies are the industry's poor relations

More programmers and analysts are forsaking the security of staff jobs to reap the lucrative rewards being paid to freelance contractors. Lynne Curry reports.

Freelance information technology specialists are streaking ahead of their permanent colleagues in the pay stakes. End-of-year salary surveys by bodies such as the National Computing Centre and the leading freelancers' publication, Freelance Informer, point to a growing gulf in affluence.

Fragmentation in pay rates is reinforced by differences in pay scales for the regions of the country - with the South-east showing marked advantages - and in the rates for the same jobs in different sectors. A systems development manager at a bank is likely to receive about 50 per cent more than his or her counterpart at the local council office, and some of the lowest rates are at computer companies themselves.

The head of management services at an electricity company, or heading a department with up to 50 staff, is likely to earn no more than a freelance PC developer, based on contract rates quoted by the agency Prime Selection. A senior systems developer on staff would potentially be offered between pounds 22,000 and pounds 27,000, much less than the pounds 40-pounds 45 an hour negotiable on contract. That works out at more than pounds 65,000 a year for a 35-hour week, even taking eight weeks off.

Karen Spurr, director of the contracts division of one of the leading agencies, Harvey Nash, says that specialists can literally double their earnings overnight by leaving their staff jobs and working on contract.

"If a skill becomes rare, it pushes the prices up, and it's obviously led by market conditions, such as Year 2000, which calls for legacy system skills," she says. "A Cobol analyst programmer could earn pounds 25,000 to pounds 30,000 on staff. The expectations on a contract basis would be between pounds 1,300 and pounds 1,600 a week.''

The gap in earnings between "permies'' and contractors, most of whom work through their own limited companies, is underscored by the respective rise in salaries last year. Whereas staff salaries rose by just above the rate of inflation, at 4 per cent, contractors' incomes rose by double that. Agencies put the rate increase higher, at between 12 and 20 per cent, and some agencies say that IBM mainframe rates have gone up by 22- 30 per cent, to pounds 1,300 to pounds 1,400 a week.

Predictions for 1998 are that freelancers' pockets will have even more buying power, as they are predicted to swell once more by well over the inflation rate. With the millennium problem looming, and companies needing extra IT staff to ensure that their systems recognise the new century, there are no prospects of a dive in demand or in earnings.

One of the most comprehensive examinations of freelancers' earnings, the annual survey by Freelance Informer, discovered that the average turnover for contractors' companies in 1997 was pounds 58,104, 8 per cent up on the pounds 53,750 reported in 1996. A small elite of companies netted more than pounds 90,000 and 1 per cent raked in pounds 150,000 or more. Only 5 per cent of the sample earned less than pounds 20,000, and 3 per cent less than pounds 10,000. The income of the company virtually equates with the salary of its one employee. About 60 per cent of respondents expect their rates to rise again this year.

Not surprisingly, the prospect of earning more money is now mentioned more often than it used to be when freelancers are asked what made them give up the perceived security of a regular workplace. Whereas in 1996, 23 per cent of the Freelance Informer sample said they had left permanent jobs because they were made redundant or sacked, this figure has gone down to 19 per cent - while the number of people attracted to self-employment by the money has gone up year on year, from 31 per cent in 1995 to 42 per cent in 1997.

By contrast, the National Computing Centre found that although nearly two-thirds of the companies they surveyed expected to increase their employment of IT systems and support staff over the next two years - as they have done over the past year - wage rises were nothing like as volatile. The average increase on overall salary levels in 1997 was 5 per cent.

Dominic Cornford, an information analyst and associate consultant with the NCC, said contract rates were more affected by economic climates and in the recession had plunged when salaries had remained stable.

"We have been steadily emerging from the recession for the last three years, although there are regional differences," he says. "But one of the features we noticed was companies looking for more skills in Internet and intranet development, although not necessarily recruiting, but training internally."

Regional variations in salaries, Mr Cornford says, are the most significant factor for non-management posts and, even with management posts, can make enormous differences to pay levels. Higher rates for all jobs in Greater London have not only remained, but have grown. A communications manager paid pounds 36,600 in London would earn pounds 27,500 in the South-west or Wales. Technical support managers would earn pounds 35,000 and pounds 30,000 respectively, and senior systems developers pounds 27,500 and pounds 23,500.

Salary differences between sectors emerge most starkly between the public services and finance and business. Even IT trainees, earning pounds 14,000 in finance, are about pounds 3,000 a year better off than in the public services. A member of technical support staff moving from public services into finance or business services could expect a pay hike of pounds 5,000 on a salary of pounds 18,500, and the differences are more marked higher up the promotion ladder.