The 24-year-old's deal is believed to expire in the summer but as yet, he has not accepted an offer of fresh terms from the Royals.
However, McDermott has insisted that the centre-back has not been included in recent matches because of mistakes that he made against Stoke City.
"The contract does not come into it at all," he told the club's official website. "I thought Sean Morrison was excellent against United and it was just a personnel decision. You live and die by that.
"I spoke to Pearcey on Friday, I said to him he needs to do better [for both goals against Stoke]. He had to do better picking up Robert Huth for the set play and then when Jerome turned him for the second goal. He accepted that.
"Obviously I'm frustrated with the contract situation, it's a good offer, he's got to make his mind up. He says he wants to stay and play for me, he has to make his own mind up on that."
Pearce joined Reading as a trainee back in 2001.