Contracting might not make you rich so quickly these days. Oversupply of freshly-retrenched candidates is driving down hourly rates by as much as 20%.

“Temporary rates are subject to supply and demand, and banks paid a scarcity premium for many high-demand contract roles before the financial crisis,” says Simon Tobin, national director of financial services at recruiters Michael Page.

Financial professionals, especially those between jobs, are generally open to contracting, which has boosted the candidate base. “Because supply has loosened up, rates are falling somewhat, but it’s not that banks are forcing people to work for below what they’re worth. The rates are just more realistic at the moment – market rate without the scarcity premium,” adds Tobin.

Firms are continuing to focus on cost reduction which has led to downward pressure on contractor rates, says Vanessa Harding-Farrenberg, joint managing director of Morgan McKinley’s Sydney office. "Within accounting and finance, for example, candidates who were earning $60 per hour 12 months ago could now be on $50."

The compensation situation is even worse in IT. Rates have tumbled by about 20% compared to six months ago, so someone who earned $90 an hour would now be on about $70, says Duncan Amos, divisional director of technology at Bluefin Resources.

“When I ask contractors what they’re looking for today, sometimes it’s even less than what the bank is offering to pay. There is so much competition in the job market. In this market, there is someone probably willing to work for less than you,” adds Amos.

Banks are capitalising on this candidate glut. Amos explains: “If banks have an essential IT project, such as a systems upgrade, they are bringing it forward six months to take advantage of the cost savings. If you have 50 contractors, saving 20% is a lot of money.”

The outlook isn’t much better for current contractors who want to keep working at the same firm. It’s getting more common for existing contracts not to be extended, or to be approved only at the last minute, according to Amos. “These contractors are no longer bothering to ask for rate increases, something which they nearly always did in the good times.”

And time may be up for overpaid juniors too. “You won’t find too many 24-year-olds earning $90 an hour any more,” he adds.