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Government The Almighty Buck IT

NY To Replace IT Vendors With State Workers 178

Posted by Soulskill
from the this-can-only-end-well dept.
dcblogs writes "New York state plans to replace as many as 500 IT contract workers with a new type of temporary state worker. The state estimates it can save $25,000 annually for each contracting position that is in-sourced. This is the result of a new law creating 'term appointments,' which strip away some hiring and firing rules that apply to permanent state workers. These term appointment workers are employed 'at will.' Term appointments can be up to five years and workers get state benefits. Proponents of this change said a state IT worker might earn an average of $55 an hour, including benefits, while the state pays its contractors an average of $128 an hour for workers in similar jobs."
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NY To Replace IT Vendors With State Workers

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  • Term appointments can be up to five years and workers get state benefits. Proponents of this change said a state IT worker might earn an average of $55 an hour, including benefits, while the state pays its contractors an average of $128 an hour for workers in similar jobs.

    Of course, some of that $128/hour the contractor gets goes toward employee benefits... and the cost to the state will be more than $55/hour including benefits...

    • Re: (Score:2, Informative)

      by geekoid (135745)

      What? the money they pay contractors goes towards state employee benefits?

      That would be weird.

    • by Fujisawa Sensei (207127) on Friday March 12, 2010 @04:40PM (#31456122) Journal

      Term appointments can be up to five years and workers get state benefits. Proponents of this change said a state IT worker might earn an average of $55 an hour, including benefits, while the state pays its contractors an average of $128 an hour for workers in similar jobs.

      Of course, some of that $128/hour the contractor gets goes toward employee benefits... and the cost to the state will be more than $55/hour including benefits...

      More like $50/hour goes to the peon doing the actual job, and $78/hour goes to the contract holder.

    • by blueg3 (192743) on Friday March 12, 2010 @04:40PM (#31456124)

      It may not be true, but the wording they've chosen is saying that the $55/hr includes the cost of benefits -- not that the cost is $55/hr plus benefits. So you're comparing hourly cost including benefits to hourly cost including benefits.

      • by Idbar (1034346)
        Ah, but what I get from this, is that they are temps, and that hiring them as temps, they don't need to pay the same benefits as the permanent workers. So now, they get away with paying less for the same labor. Clever!

        Now, how long until off-shored companies realize they can do that too and cut their costs?
    • by dkleinsc (563838)

      But presumably it's still less than $128/hr, which makes the change worth it. Although personally I'm wondering why they're pushing for making these folks "temporary". As far as I'm concerned they should just hire them as state employees and be done with it.

      Unless, of course, there's a lot of efficiency coming from each of the contracting organizations having a separate sales, finance, and management team scurrying around trying to direct state money to their company.

      • by rainmayun (842754)
        Making them regular old unionized state workers makes them incredibly hard to fire, among other things. so you end up with a higher head count than you might otherwise, because you have to hire people to carry the dead weight.
      • Temps are expendable positions, it's harder to remove full time postition. full time position are often assigned by the legislature directly to a department. You can't remove or add new ones at will. Temp position are different.
        • by theghost (156240)

          That's true and it makes perfect sense if they're turning these into 5-year positions because they won't need IT people 5 years from now. Anyone think that's likely?

          This is an end run around unions during a time when unions are at their weakest bargaining position. Whether or not your political perspective sees that as a good or bad move, the only question that needs to be asked is "Is this a necessary step given the current fiscal climate?" Perhaps it is, but it's also another step in the ongoing "race to

      • Without knowing how the math works in this case (based on having done contract development for government entities in the past; my experience may or may not be relevant here)... probably, state employees are entitled to a set of benefits and health insurance that are really good, vs. the probably not very good benefits the temporary workers will get.

        Really good benefits are expensive. The government employees I last worked with, for example, had health care that paid for basically everything with no copays

      • Doing this will likely drive contracting costs down. We all know how much private companies make off of govt contracting jobs. Maybe this will make them a bit more realistic, and be competitive in 5 years?

        Locking them in for 30 years only creates "guaranteed" jobs, and we all know what happens to efficiency in gov't positions like those. Firing people in from gov't jobs is notoriously difficult, this way they have an auto-fire mechanism and if they want them back, they can re-hire them. As dirty as it i

    • Re: (Score:3, Interesting)

      by RulerOf (975607)

      and the cost to the state will be more than $55/hour including benefits...

      Well... duh. Assuming 40 hours/week and 4 weeks/month, that's 160 hours. I know a man who's recently retired and has some serious risk factors that put private insurance for him at $600+ per month, so assuming he's the high end of that... it's what, just under $4/hour more?

      Round it up to $60/hour for the pay+benefits for each man hour they incur, and they're still more than halving their costs. That sounds like a win to me, and I'm not even into finance.

      Still, are you claiming this is a bad thing? I p

      • by PopeRatzo (965947) *

        I know a man who's recently retired and has some serious risk factors that put private insurance for him at $600+ per month

        That's actually quite low.

        If I had to go out on the "free market" to buy health care, I'd be paying about $1100 per month. For myself. And except for an unhealthy appetite for the triple chocolate cake from Alliance Bakery over on Division Street, I'm in good shape.

        I've got a friend who's a martial arts instructor and is in the best shape of any 50 year old I've ever met. When he was

        • Apparently health insurance costs vary drastically with location. It's no wonder people are so polarized about the urgency of health care reform. If you live in an area that already has affordable health insurance, chances are you think little needs to be done. If you live in an area that does not have affordable health insurance, chances are you think much needs to be done.

          For instance, $120/month in Maricopa County, AZ would get me a PPO plan with a $2500 deductible and 0% coinsurance. There are dozen

    • by NevarMore (248971)

      Rule of thumb is salary + salary/3 = total cost with benefits

    • This isn't about saving actual money only being able to say that you cut IT wages and saved thousands. Typical wrap rates built into contracting employees are between 2 and 3. Most small companies have a wrap rate in the low 2's but large companies or the government personnel are typically 3 or above so that $55/hour becomes more like $165/hour in actual costs, but how can you expect a lifetime politician to understand something as simple as that.
    • by dave562 (969951)

      the cost to the state will be more than $55/hour including benefits...

      Maybe yes, maybe no. If $30 of that $55 per hour is spent on wages, that comes out to an average of $60,000 a year. That's pretty typical for your average, entry to junior level IT job. At $30 an hour, that leaves $25 per hour for benefits, or $1000 per week / $4000 per month. Looking at it in those terms, $55/hour doesn't seem to be that low of a number.

  • by Anonymous Coward

    They're called "slaves", actually. And "right-to-work" laws really mean that you have the right to be fired for no reason and have no recourse. Funny what happens when you let corporations write the laws in this country.

    • Re: (Score:2, Interesting)

      by FlyingBishop (1293238)

      Contractors have inflated pay to deal with the fact that they don't have steady employment (which in our fucked-up benefits system means you don't have reasonably priced healthcare, insurance, or retirement savings.)

      So yeah, this is a win for IT workers. It's a loss for standard state employees, but these IT workers get a steady job with decent pay where they once had high-paying jobs, most of the money from went was thrown into basic necessities, not to mention looking for new jobs.

      • by rainmayun (842754) on Friday March 12, 2010 @04:59PM (#31456420)
        "Contractor" in this sense does not necessarily mean "independent contractor". Most "government contractors" are employees of firms and get paid on W-2s like anybody else. The "contract" is government with firm, not government with individual.
        • Re: (Score:3, Informative)

          by Knara (9377)

          "Contractor" in this sense does not necessarily mean "independent contractor". Most "government contractors" are employees of firms and get paid on W-2s like anybody else. The "contract" is government with firm, not government with individual.

          QFT. For some reason on IT sites posters seem to equate "contractor" with "someone who works freelance by running their own business."

          Most contractors are managed by a contracting firm, and get nowhere near what the firm bills out for their time.

          • by guruevi (827432)

            I used to work for a contracting company and what the customer pays is on average 2 to 5 times as much as you earn. I don't really see the point in anybody outsourcing to a contract company except maybe for temp jobs. However I see people that have been contracting for the same company over 10 years. Think of the money they could've saved by just hiring them outright.

        • by PPH (736903)

          So, who's getting the $55/hr? The employee of the job shop, or the job shop itself?

          This is a big deal, because if the State is paying $55/hr to some contracting outfit, that outfit has to take FICA, State and local taxes and insurance payments out (not to mention something for the job shop overhead). That will leave the employee with little more than minimum wage. $128/hr is cheap when its paid to the job shop.

          As to the "independent contractor" idea: Good luck with that. If you think the gov't is going to

    • Re: (Score:2, Troll)

      by garcia (6573)

      you have the right to be fired for no reason and have no recourse.

      You mean like any at-will employee--like it should be because white color unions shouldn't exist in the first place?

    • Re: (Score:3, Insightful)

      by rainmayun (842754)
      I think I have a pretty good idea of your philosophical leanings on the subject of labor law, but I'll say this anyway for other readers. "Right-to-work" laws should really be termed "opportunity-to-work" laws, because the economic theory is that by lowering the potential risks for employers, they will be more willing to take those risks. Yes, you have the "right" to be fired immediately, but without those laws you might never have had the job in the first place.
    • Re: (Score:2, Informative)

      by Joucifer (1718678)

      ..."right-to-work" laws really mean that you have the right to be fired for no reason and have no recourse...

      "right-to-work" normally means that you don't have to join a union. You still have plenty of options if fired for no reason.

    • Re: (Score:2, Interesting)

      by PopeRatzo (965947) *

      And "right-to-work" laws really mean

      It's not accidental that most of the "right-to-work" states were also the states that loved slavery so much that they seceded from the USA and went to war.

      Since they can't legally own people any more, they pass "right-to-work" laws that are really "right-to-abuse workers" laws.

      Also interesting is that the "right-to-work" states all pool at the lowest end of the education rankings. They are also the states with the highest divorce rates and the highest rates of teen preg

    • by Dishevel (1105119) *
      Unions had their chance. They were needed but they have become more of a threat than anything ever. They use their union dues to buy politicians to protect their workers over everything. The end result is lazy fucks that cant be fired making items and services way more expensive. In a state like California where the state employees were unionized we have massive expenses that can not be undone. We can't save money by letting dope users out of prison because even if we reduce the inmate population by half we
    • by Pharmboy (216950)

      When you fire a "right to work" employee without cause, they are fully eligible to claim unemployment benefits. The vast majority of workers in the US are in "right to work" situations, and most of the time it works just fine. I'm not sure if NY's rationale or methods are the best for their situation, but I am not so sure that everyone in a "right to work" situation is slave. As someone who has made a fine living over the last 30 years and has never belonged to a union, I'm confident that being in a unio

  • by Anonymous Coward on Friday March 12, 2010 @04:36PM (#31456078)

    On the surface this sounds like a good idea.

    Employees are more loyal, and generally care more about the work they are doing than outside contractors.

    I have mixed feelings about creating the positions as a special semi-temporary group. Its good in that it allows the state to actually hire needed people, but it sounds like they are second-class employees. Only here temporarily. Not really part of the team, but expected to work extra hard in the hopes of someday getting to be a real employee...

    • That's exactly it. The gov needs to be able to flexibly hire new staff on demand and fire them on demand. They used contractors for this, now they want to do that in house. This is the new cloud of employee power.
    • by 1s44c (552956)

      Employees are more loyal, and generally care more about the work they are doing than outside contractors.

      I'm not saying you are wrong because we both work with different groups of people most likely in different countries. However what you describe is the exact opposite of my experience. I find permanent staff just want to make it to the end of the day and go home. Few really care about what they do and the ones that do get drawn into political battles with those that don't. The bad ones can't be fired unless they really screw up big. The only exceptions are in companies that are still small enough to tell goo

  • by assemblerex (1275164) * on Friday March 12, 2010 @04:43PM (#31456184)
    If they hire IT workers who match the quality of most NY state workers, they will wind up hiring contractors in the end anyways...
    • Re: (Score:3, Insightful)

      by SatanicPuppy (611928) *

      If they are able to actually fire an employee without jumping through a million hoops, then they're more likely to get and keep good employees.

      It's not that all state employees are terrible, it's that they're just not accountable for their performance, and it's hard to stay sharp when you don't really have to answer to anyone.

      • True. Most of the best gov. workers end up leaving to better positions in the private sector, leaving the folks behind who can't hack it in the private sector. Don't believe me? I've seen this first-hand at a DOE lab and a state's IT dept.
      • by dave562 (969951)

        It is also hard to manage a department when dealing with substandard employees. What ends up happening is that the department has to work around the substandard employee. They will eventually get terminated after a number of write ups and poor performance reviews but it takes a significant amount of time. Even then the union will go to bat for them and drag out an already long process.

      • by Narpak (961733)

        It's not that all state employees are terrible, it's that they're just not accountable for their performance, and it's hard to stay sharp when you don't really have to answer to anyone.

        Speaking somewhat from personal experience even if you want, wish and are able to do a good job, or better than what you are doing, interlocking levels of bureaucracy and departmental hierarchies will kill whatever soul and will to live you might have.

  • If you properly manage a smaller number of very high paid IT workers instead of a much larger number of low paid IT workers, you'll find that the ROI is hugely in favor of the higher paid workers - because they were "properly managed". That includes selection, hiring, and allocation of time and resources. (In many ways it means give them the tools and the requirements and then get out of the way.)

    Now if you are lousy managers it makes sense to hire low paid IT workers because you pay less and you won't

    • by PPH (736903)

      You've got to consider management's motivation.

      Back when I used to work for this little local aviation company, the manager in charge of wiring design (engineering) was also the liason with our IT department. It was his job to set requirements for engineering computing needs. But on the engineering side, everything was islands of automation, crippled islands of information systems. Everything had to be hand-entered into incompatible computing systems (by hand) and data moved back and forth manually. It was

  • This sounds like a good move for government IT. Governments IT shops (especially unionized shops) suffer badly from the dead-sea effect. The more productive IT workers who keep their skills up will tend to stay for a few years ago go. The less productive are free to stay for 30 or 40 years because they can't be fired and have no potential of finding a job that pays as well. Over time the IT department becomes heavy with unproductive employees.

    Medium-term employment provides a methd for the government
  • Same old story (Score:5, Insightful)

    by surfcow (169572) on Friday March 12, 2010 @05:14PM (#31456640) Homepage

    Management: IT is expensive - we can save money by OUTsourcing.
    5 years later...

    Management: IT is expensive - we can save money by INsourcing.
    5 years later, Go to line 1 ...

    Those of us who've been in IT for a while have seen this cycle through a few times. After much reflection, I conclude that there is no such thing as competent management.

    • by Foolicious (895952) on Friday March 12, 2010 @06:49PM (#31458002)

      After much reflection, I conclude that there is no such thing as competent management.

      I'm not sure it takes much reflection to conclude that, but you still have the best post by far. I wish I had a prize to give you.

    • by 1s44c (552956)

      Management: IT is expensive - we can save money by OUTsourcing.
      5 years later...

      Management: IT is expensive - we can save money by INsourcing.
      5 years later, Go to line 1 ...

      Those of us who've been in IT for a while have seen this cycle through a few times. After much reflection, I conclude that there is no such thing as competent management.

      Exactly so. Middle management in big companies is a dumping ground for the inept, burnt out, and jaded. They fly around the world constantly to escape the work they should be dedicating themselves to. Their ignorance of the departments and technologies they manage is often shocking.

      There are all too few exceptions.

  • They could replace those IT workers with trained monkeys and save a lot more money! Unfortunately, you usually get what you pay for.
  • I wonder if the meeting went something like this [google.com].

  • Unless things are really different there, its pretty safe to assume that most of those employees arent making anything close to $128, having been in that area of employment I can assure you for most of the people doing the work, $55 will be a raise. Most contracting firms (yes there are some exceptions) these days are just a legal form of prostitution, the pimp gets the big money unfortunately they tend to have enough pull to block the independent contractor from most companies looking for help.

  • Eventually, even the government will discover that labor is cheap in an economic downturn. They're smart to lock desperate people into cheap 5 year contracts right now.

  • More Info (Score:2, Informative)

    by slugo (243955)

    I know of this issue first hand being a IT contractor and working for the state. Where Im at they have approximately 125 IT contractors. So far they have laid off 15 IT contractors, are trying to convert 15 or so more to government service. Next in Oct all IT companies will have to bid through a Managed Service Provider. Basically an appointed IT contractor that all the agencies will go through to source contractors. I don't believe they plan on eliminating all contractors since I don't think they can

  • Proponents of this change said a state IT worker might earn an average of $55 an hour, including benefits, while the state pays its contractors an average of $128 an hour for workers in similar jobs."

    I assure you, the average contractor on a state job doesn't pull in $128/hour. His pimp...I mean contract agency...charges on average $128/hour for his services. The contractor gets only a piece of that.

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