In house IT staff are getting made redundant while this is going on. Contractors deserve to get what the market will pay - but it doesn't say much about planning and skills development at RBS does it.
Contracting staff don't tend to cost companies much more than direct employee staff (the difference is typically <20%) - the big difference is that companies have to provide employees benefits,national insurance, pensions, holidays, sick pay, bonuses etc whereas for contractors they just get the monetary equivalent.
At RBS this is particularly significant as they have some of the best non-financial employee benefits in the financial sector.
The ability to hire/fire contractors at will makes the 20% premium well worth it for companies, especially when those skills are only need for a short time period or for particular projects.
It probably looks good on paper for companies but there are often some hidden pitfalls.
Firstly, the options appraisal around whether to increase headcount or to get in a "temporary" consultant are highly sensitive to estimates about how long a piece of work will take to do and how much ongoing support would be required afterwards. If the estimates are optimistic then it might actually have made more sense to hire a permanent employee.
Secondly, there is often a motivation hit when contractors are brought in. If the contractor is brought in solely to increase a team's capacity (rather than to bring in skills that a team lacks) then the permanent members of staff will be all too aware that the person sitting at the next desk is making twice as much (or more!) for doing the exact same job.
Even if you're using contractors on a long term basis the premium can be worth it if you're in industry which goes through contractions so you can get rid of staff when you want to. Like I said the actually premium is relatively small for companies, and it's much easier to replace a contractor with a employee than vice versa if you need to.
I've worked at a few companies with mixed contractor/employee teams where it hasn't been an issue, after all there's nothing stopping the employees from becoming contractors if they prefer that lifestyle and it aligns with their long term goals.
From what I can gather here in Edinburgh, RBS seems to be regarded as totally chaotic but with limitless financial reserves - pretty much heaven for contractors.
At RBS this is particularly significant as they have some of the best non-financial employee benefits in the financial sector.
The ability to hire/fire contractors at will makes the 20% premium well worth it for companies, especially when those skills are only need for a short time period or for particular projects.