Use of Contract Workers Down But Not Out

December, 2011

IT organizations reduced use of contract workers over the course of the recession and use remained down over the past year, reflecting the cautious economic outlook.

Our study, Current Use of IT Contract Workers, finds that during the past three years, the use of contract workers as a percentage of the IT staff at the median declined by one percentage point, from 5% in 2009 to 4% today. (Figure 1).

ContractLaborRB Fig1 - Use of Contract Workers Down But Not Out

While some IT organizations hired contractors in lieu of full-time employees others reduced use of contract labor in favor of retaining IT staff. The net effect is a decline at the median in this generally stable metric.

Traditional wisdom states that staffing agencies are good leading indicators of the economic cycle. At the start of an upswing, companies tend to bring on temporary employees to meet needs until they are certain the new business is sustainable. During 2011, IT organizations were not yet budgeting for growth. However, we anticipate contract labor use will return to the pre-recession 5% level over the next few years as more IT organizations gain approval to increase spending.

The decision on whether to use contract workers is an important one. There are pros and cons either way: flexibility versus stability, lower costs versus no fixed rates. Managing the contract workforce is a balancing act, and IT managers need to determine the proper balance between full-time employees and temporary help.

In the full study, we assist IT organizations in setting contract workforce policy by providing benchmarks for the use of contract workers by organization size and sector. The study finds that the use of contract workers varies predictably by organization size, with large organizations making more use of contract workers than smaller organizations, and that some sectors make more use of contractors than others. Overall, the balance between contract labor and full-time employees has remained relatively stable for the majority of organizations.

This Research Byte is a brief overview of our report on this subject, Current Use of IT Contract Users. The full report is available at no charge for Computer Economics clients, or it may be purchased by non-clients directly from our website (click for pricing).