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Salary Survey Commentary for January 2009

Overview

The impact of the financial crisis on IT recruitment is now being seen loud and clear with the number of vacancies advertised during the last quarter of 2009 down by 24.3% compared with the third quarter. From 129,672 jobs to 98,173. This decline in jobs is worse than that seen in 2001 and is quickly approaching the downward spiral experienced during 1991. Compared with the start of 2008 recruitment is down by a massive 36.1%.

Advertising in magazines and press is down this quarter by 24.2% and on the main internet job boards by 24.3%. Internet advertising continues to be dominated by recruitment consultancies with 94.6% of all jobs being placed by them and only 5.4% jobs being placed directly by companies. Throughout 2008 the number of consultancies advertising jobs fell from 5,893 at the start of the year to 3,736 in the last quarter, a fall of 36.6%. Even more worrying is that there are 56.9% less companies recruiting directly since the start of 2008. Their numbers went down from 4,082 to 1,758.

Needless to say this reduction in demand is starting to feed through to pay levels with advertised salaries remaining at the same level as last year. The first time this has happened since 1992. The figures also show that of the 55 job titles included in the survey 31 had lower offers than in the previous quarter. There are however wide variations dependent on skills, location and sector. The contract market is always the first to see a contraction in times of recession. For the fourth successive quarter the number of jobs has fallen. This time by 26.9% compared with the previous quarter. Contract rates being offered are down by an average of 2.3% quarter on quarter, but with rates on some job functions down by over 10%.

Skills Summary

SQL again remained the skill most in demand, but with quarter on quarter demand down by 12.5%.

In general the top ten skills cover products used primarily by developers. Here the skill that continues to decline most in popularity is Java with jobs down by 27.4% followed by Oracle down 25.9%. The more in vogue skills of C# and .NET are also down, but by just 13.9% and 17.1%, somewhat less than the headline reduction in IT jobs. Elsewhere jobs in Visual Basic are down by 19.9%, C++ by 16.1%, SQL server by 14.9% and C by just 8.1%. SAP the leading ERP product has historically attracted a higher salary premium. Here quarterly demand is down by 21.4% with pay for developers down 1.5%.

The contract market also has SQL as the skill most advertised, and here the number of jobs on offer is down by 29.6% compared with the previous quarter. The remaining skills making up the top ten for contractors are C, Oracle, SQL Server, C#, Java,, .NET, SAP and ASP.

Regional Summary

The ongoing turmoil in the financial market is now affecting all regions. Where previously the main slump has been in the London area this has now extended to all area’s of the UK. The number of jobs advertised in Inner London fell by 23.5% and in Outer London by 26.8%. Since the start of 2008 the London area has suffered a job decline of almost 45%, with most of this occurring in the last six months. In other regions recruitment is down by 27.5% in the North East, by 22.1% in the South, by 21.4% in the West Midlands, and by 10% in the West. London and the South represent 61.5% of all jobs advertised, and it is here where recruitment, in absolute values is weakest.

Contract vacancies are also down in all regions reflecting what is happening with permanent recruitment. The Inner London and Outer London areas are recruiting 26.7% and 25.5% less contractors than in the previous quarter. Other regions are seeing a similar decline in demand.

Industry Summary

The main influence again came from the financial sector, which combined with financial software houses account for a substantial proportion of all IT recruitment. Compared with the previous quarter job counts in finance are down by 32.1% and in Software houses by 21.6%. In the previous quarter finance accounted for 28.4% of all jobs. This is now down to 25.3%. The biggest employers are software houses who account for 53.1% of jobs advertised. Other sectors such as manufacturing are down by 20.6%, retail by 14.0% and media by 17.9%. Public sector recruitment seems to be bucking the trend with 9.5% more jobs being advertised since the previous quarter.

The finance sector is rapidly becoming a no go area for contractors with quarterly job offers down by a whopping 40.6%. There are now 40.6% fewer contract vacancies in finance than at the start of 2008. Elsewhere contract jobs in retail are down 32.9%, in media by 27.6% and manufacturing by 17.8%. The public sector maintains the status quo with the contracts on offer up marginally by 0.3%.

Management

The number of management vacancies this quarter fell by 23.9% compared with the previous quarter. Down from 6,973 jobs to 5,306. Managers employed in the financial sector have seen jobs disappear at the rate of 32.4% during the same period. Quarter on quarter vacancies for the main job functions of System Development Manager and Computer Services Manager are down by 19.2% and 26.1%. Elsewhere jobs for Software Managers are down by 35.2%, Technical Support Managers by 22.0%, Helpdesk Managers by 17.2% and MIS Managers by 17.1%.

Salaries across the group remained stagnant quarter on quarter. Compared with a year ago pay offers are down by just 0.2%. There are some variations across job functions with Technical Service managers pay up by 4.8%, Computer Service Managers by 3.4% and Directors by 1.7%. This is counteracted by offers for Helpdesk Managers being down by 3.3% and Network Managers by 6.4%.

System design, business analysts & project management

The number of jobs advertised this quarter was down on the previous quarter by 33.2%. From 29,807 jobs to 19,905. The main impact of this decrease were felt by Test Analysts and Systems Analysts where the number of jobs on offer are down by 56.1% and 39.0% respectively. Project Managers represent the largest job function in this group and here the number of jobs are down from 7,261 to 4,483 jobs, a fall of 32.8% on the quarter. Business Analysts form the next major job function and here the total number of jobs fell by 33.7%, and within finance by 40.6%. Prince, SAP and Oracle feature as the main software skills being sought. Salaries being offered are up on last year by 0.9%, but are down 1.25% quarter on quarter. Project Leaders in particular have seen offers down by 3.5%.

The number of vacancies for contractors is down this quarter by 31.4% compared with the previous quarter. In particular the demand for Senior Business Analysts in financial consultancies fell by over 50%. Demand for the key job of Project Manager is down by 35.1%and for Business Analysts by 31.4%. The rates on offer have also suffered and are down by 3.5% on a year ago.

System development & programming

This benchmark group of jobs represents over 37% of all jobs advertised and as such is a key indicator of what is happening within IT recruitment. The trend here is that the quarterly decline in job offers has accelerated from the 9.9% fall recorded in the third quarter to 20.2% in the last quarter of 2008. Job counts are down from 43,121 jobs to 34,396. The main employer of developers continues to be software houses and financial organisations. These two sectors account for over 70% of all IT recruitment. It is here that demand has weakened considerably with combined job offers down by 11.3%. Significantly the share of jobs in finance over the past year has dropped from 28.3% to 23.6% of all jobs advertised. For the group as a whole salaries on offer are running at the same level as a year ago. This is starting to change with pay in the last quarter down by 0.4% compared with the previous quarter.

Despite this public sector pay managed to break into positive territory with average increases of 2.6%. However these figures need to be treated with some caution as salaries can vary considerably depending on location, business sector and software skills. The difference in pay being offered for specific software skills can vary by up to 40% between the lowest and highest average for a developer The spread of salaries based on location can also be substantial. This is shown in that a developer employed by software houses earns 25.6% more in London than in the North East. The top skills required are for SQL followed by C, C#, .NET, ASP,SQL Server and Java.

The demand for contract development staff has now been in decline for five successive quarters. In the latest quarter the number of jobs on offer is down by 27.3%. Jobs in finance are again the problem with vacancies down by 38.5% quarter on quarter and by 59.8% since the start of the year. Difficulties in finance is also affecting recruitment in software houses with vacancies down by 29.2%. The overall result is that developer rates are now down by 4.3% quarter on quarter. Top skills required are for SQL, C, C#, .NET & SQL Server.

PC Support

Up until mid 2008 demand for PC support staff held up well. This has now come to an end with job counts down by 27.3%. From 9,077 jobs to 6,601. The accumulated fall over the last six months has been 36.1%.The demand for the benchmark job of PC Support Analyst is down by 25.8%. Help Desk Support staff have again born the brunt of the downturn with 35.6% fewer jobs on offer. In general pay offers remain the same as a year ago. Top skill requirements are for Office, Windows XP, SQL and TCP/IP.

For the fourth quarter in a row demand for contract PC support staff is also down. This time by 24.3% compared with the previous quarter. Rates reflect this and are down by 1.2% quarter on quarter. Top skills requested are for Office, Windows XP, Exchange, Windows 2000 and SQL.

Technical support

The number of jobs for this group decreased by 22.1% compared with the previous quarter. Down from 19,173 jobs to 14,954. System Administrators make up over 42% of all the jobs within this group. Recruitment by software houses is down by 21.1% and in finance by 28.4%. These two sectors respectively account for 51.2% and 27.2% of recruitment. As seen in the previous two quarters the downward trend in recruitment from software houses also affected technical sales support with jobs down here by 19.3%.

National salaries for administrators this quarter averaged £36,526 up by 2.6% on last year, but with variations that show offers going down in software houses by 1.0% in the last three months. Senior Administrators with substantial experience average £47,480, down by 1.6% on last year. Annual increases across the group are being held at 0.2%, pretty much the same as reported in the previous quarter. Over 52% of all jobs advertised for Administrators are for skills in Linux, Unix, SQL or Solaris. Having made rapid inroads over the past two years Linux has now overtaken Unix as the top administrator skill required. The remaining top skills cover Exchange, TCP/IP and Oracle.

Jobs for contractors this quarter decreased by 26.2%, down from 3,816 jobs to 2,816. Rates for the group as a whole are also down on a year ago by 1.2%. Since the previous quarter rates for the key job of System Administrator has seen a fall of 2.6%. Software skills required are for Unix, Exchange, Linux, SQL and Solaris.

Software engineering

The number of jobs for software engineers decreased by 14.9% compared with the previous quarter. Down from 8,601 jobs to 7,575. This is somewhat less than that experienced by other job groups. Vacancies for the main job function of Software Engineer are down by 15.4% and for Software Test Engineers by 19.8%. Salaries on offer compared with a year ago are actually up by 1.9%, and surprisingly up by 3.5% quarter on quarter. This reverses the trend reported in the previous survey. Software Engineers are now being offered average salaries of £36,902, with variations of up to £46,440 for Senior Software Engineers. The top skills in demand are for C, C++, Embedded software, C# and Java.

Although demand for contractors in this group were up in the previous quarter the picture is not so good this time round with the number of jobs on offer down by 28.5%. From 1,370 jobs to 1,979. Rates of £35/hour for Software Engineers are down by 5.7% against the previous quarter. Senior Software Engineers with substantial experience are now being offered up to £55/hour nationally. Skills needed are for engineers with experience of C++, Embedded, C, Java and Linux.

Database administration

The number of jobs advertised for Database Administrators/Analysts fell by 21.0% compared with the previous quarter, down from 4,877 jobs to 3,854. This group of jobs is intended to reflect the design and administration functions related to large-scale corporate databases. In smaller installations the responsibilities may well be covered as part of system administration or even PC Support. Salaries for Database Administrators increased by 0.6%, compared with last year and are now being advertised at £39,131. This however is 1.0% less than the average salary reported in the previous quarter. Senior Database Administrators pay is also up and is now averaging £53,723. Software skills being sought cover SQL, Oracle, SQL Server, Access and Unix.

Quarter on quarter contract vacancies fell by 17.1%, down from 1,449 jobs to 1,201. For the fourth successive quarter the main impact came from a reduction in demand from the finance sector where the number of jobs are down by 21.7% compared with the previous quarter. Contractors are also seeing rates going down by 2.8% on a year ago. This is the third consecutive quarter in which we have seen rates dropping. Top skills required are for SQL, Oracle, Access, SQL Server and Unix.

Networking & communications

The number of jobs for this group decreased by 24.5% compared with the previous quarter. From 5,242 jobs to 3,958. The slowdown in recruitment is showing up in the level of salaries on offer. Across the group they are down by 1.0%, with Senior Network Engineers down by 1.1% and for the main job function of Network Support Engineer by 1.0%. Salaries for this latter job role now average £29,830 nationally, with up to £39,078 for more experienced engineers. The top skills being looked for are Cisco, Firewalls, Exchange Wan and Lan’s.

The number of jobs for contract network people fell by 12.9% compared with the previous quarter. As in the previous quarter the main reason for this is the reduction in demand from the finance sector where vacancies fell by 43.9%. Rates for Network Engineers are down on a year ago by 8.1% and by 5.9% since the previous quarter. The top skills required are for Cisco, Firewalls, Lan’s & Wan’s.

Operations

This group covers operations roles that are predominantly mainframe job functions. The exception to this are Hardware Service Engineers, which covers all aspects of hardware support, including peripherals. Quarter on quarter the number of jobs advertised in this group went down by 27.0%, from 1,527 jobs to 1,115. Job offers in finance and software houses are down by 26.5% and 27.5% respectively. Hardware Service Engineer pay is just about maintaining the levels of a year ago with an increase of just 0.3%. Top skills required are for Office, Exchange, Unix and Linux.

The number of jobs for contract staff this quarter went down by 15.1%. Hardware engineers represent 73% of the jobs in this group and here jobs are down by 17.3% compared with the previous quarter. Rates now average £19/hour. Down by 5.3% in the last three months. Main skills required are for Office, Windows XP, EPOS, Exchange and Citrix.

Internet Design

The number of jobs on offer within this group went down by 29.2% compared with the previous quarter, from 2,170 jobs to 1,536. The main job function of Web Designer accounts for 78% of the jobs advertised in the group and here 23.5% fewer jobs were advertised. Jobs in the distressed finance sector are down by 44.4%. Average salaries on offer for Web Designers range from £26500 in the manufacturing sector to £34,863 in software houses located in Outer London. The main skills being requested are for HTML, Flash, Photoshop, Illustrator and Javascript. The job functions in this group can also be associated with other design and development jobs where similar software skills apply.

Summary

If any indicator were needed of how the financial crisis is affecting the real economy then look no further than what is happening with IT recruitment. During the last quarter of 2008 levels of recruitment plummeted by 24.3%, a trend that will inevitably continue into the New Year. It is quite possible that recruitment will virtually dry up during the next quarter in a trend not seen since the third quarter of 1991.

Historically contract staff are always the first to be laid off in a downturn and this has been the trend all through 2007, with the reduction in vacancies accelerating in the latter part of the year. As to be expected redundancies are now becoming an almost daily occurrence, with frequent announcements from IT service suppliers through to end users across all business sectors. Clearly the sectors affected the most have been finance together with those software houses and suppliers to this sector. The merger and take-over activity seen recently by organisations such as HSBC, Citi, Credit Suisse, & Santander will continue to have an impact on this sector for at least the next eighteen months as banks go through the process of consolidating their IT operations. It is not all bad news however. The public sector managed to stop a downward trend in their recruitment requirements during the last quarter. The current downturn in the private sector should now make it easier for the public sector to attract highly qualified and experienced personnel. Whilst pay still lags slightly behind the private sector, the benefits of better job security, friendly family policies, holidays and the most valuable perk of a all, a golden pension deal means that the public sector is now a pretty good place to be working in.

In these constrained times it is difficult not to have some sympathy for IT recruitment consultancies. Long regarded by some employers, contractors and jobseekers as the ‘Estate agents’ of the recruitment process they do seem to be suffering big time at the moment. During the latest quarter www.jobadswatch.co.uk reported that 2,157 fewer consultancies were advertising IT jobs than in the previous quarter. If the recession of the early 1990’s is repeated we can expect this trend to continue. There is no doubt that consultancies do have a stranglehold on the market, but it is probably more efficient and cost effective to use a consultancy to filter out applicants. This is particularly true as the number of applicants for the jobs available soars. It might even lead to consultancies reducing their commission rates ???

All the evidence now points to companies putting constraints on pay rises. Overall pay for staff still in employment is stagnating, with bonus payments being severely curtailed as profits suffer. This has had the knock on effect of salaries offered in advertisements actually falling over the past six months.

It is difficult to find any good news in the IT recruitment figures that we are quoting, however it might provide a respite to some offshoring activities. The availability of people with the required skills combined with major falls in the value of sterling should start to make it more attractive for companies to retain UK IT operations. Certainly it would help this cause if there were some restrictions placed on non EU personnel being allowed virtually free access to the UK.

Commentary by : George Molyneaux
Research Director for Salary Services Ltd. - www.salaryservices.co.uk
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