The IT contracting industry is moving towards the doldrums with an increasing number of contractors being forced to realise they are going to face "an ongoing and tight squeeze in the foreseeable future".
This is according to Org Geldenhuys, a director of Pretoria-based IT recruitment house, Abacus Recruitment.
Geldenhuys said there are a number of factors causing what he termed a "a python-like squeeze", including the fact that the IT industry is still in a three-year downturn - as well as the fact that the SA government has thrown a curve-ball by tightening up on tax and labour legislation over the last two government budgets.
"There is definitely a downward cycle in terms of contracting opportunities. This, I believe, is looking more and more like it is going to be sustained. We are seeing an increasing number of companies eschew contractors in favour of employing permanent staff. Serving as yet another indicator, a major banking group recently made the decision to convert all their contracting staff to permanent staff. This is a sign of where things are moving," said Geldenhuys.
"Just from a tax point of view, until recently, contractors could get tax directives as low as 20% - but this has risen to above the 30% mark. Employers now also have to budget for sick leave, as well as compassionate leave, the skills development levy and UIF payments.
"Frankly, the prospects for contracting are not looking that rosy and it is important that contractors take a long and hard look at their potential income in the short- to medium-term. I believe the downturn cycle will be a reality for at least the next five years."
Commenting further, Geldenhuys said contractors needed to go through a "mindset change".
Laying out a few pointers, he said contractors should speak to companies that have previously employed them to find out if they are able to gain permanent employment. "This may be one of the first steps to take if a contractor wants to get out of the contracting market.
"It is also important," he said, "that contractors hone their IT skills - and do their best to gear up by adding business skills which big corporates may be able to use.
"If a contractor intends sticking to his or her guns they should rather opt for longer term contracts - even if they pay less. This is a far more prudent route to follow under the current circumstances."
Geldenhuys said contractors should also be objective about their skills and prospects. "If they are regarded as a top, sought-after contractor - and are always in demand - this might not change. They may not be affected by the downturn. But they must do an honest appraisal of their chances.
"Another option is to link up with other contractors with similar or different skills and launch a consultancy. It might sound like a way-out idea, but, in reality, these days IT workers need to be more entrepreneurial. The SA IT landscape is changing. Nothing is assured - people have to fight for their slice of the cake, and need to find ingenious ways to keep getting their slice."
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