Tag: Contractor Workforce

Contractor rates spike amid skills shortages

New data from the Association of Professional Staffing Companies (APSCo)has revealed that UK businesses are paying more for contractors as skills shortages and economic uncertainty continue to drive demand for temporary support.

According to the data provided by Bullhorn, there was a 3% month-on-month increase in contractor roles in October. These figures were up 6% when compared to the same period in 2019.

The report went on to reveal that the amount invested in attracting these individuals has increased at a much higher rate than demand. In October 2022, staffing firms showed a 7% increase in contract revenue, compared to September. Annual comparisons showed a 14% increase in October.

The greatest increase was seen in pre-covid levels. Sales are up 48% since October 2019. With contractor costs inflated above the rates of demand, all indications are that the costs of employing contractors are increasing due to individuals being able to command higher rates in a tough skills climate.

Ann Swain, CEO of APSCo, commented: “The contract labour market has been heavily relied on as skills shortages remain rife. With talent in increasingly short supply since Brexit and Covid, temporary staff have been hugely valuable in filling gaps. However, what we’re also seeing is a further reliance on these individuals in an uncertain market where fewer businesses are confident in committing to permanent increases in headcount. The spike in contract sales revenue does show the level of fees contractors are able to command in such a skills short market. While we fully expect rates to increase in a cost-of-living crisis, the pre-Covid comparisons show a significant increase which is being driven by more than just the economic climate.”

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Decision damages the flexibility of the UK labour market

Yesterday, the newly appointed Chancellor, Jeremy Hunt, upended much of the Mini Budget that his predecessor, Kwasi Kwarteng delivered less than a month ago. Hunt announced that he would scrap a planned repeal of the IR35 reforms (off-payroll) which came into effect in April 2021.

In the Mini Budget speech titled ‘The Growth Plan 2022’ that was given in September, Kwarteng delivered on Prime Minister Liz Truss’s promise to review IR35 legislation.

Understandably, this has caused frustration in the off-payroll community following hope of the repeal of legislation that added unnecessary complexities to the contractor workforce and organisations.

Clarke Bowles, Chief Revenue Office at My Digital spoke exclusively to TALiNT International:

“The new Chancellor, Jeremy Hunt has effectively lit a match under the Mini Budget, as a result the off-payroll working rules will remain in place for both the public and private sectors creating a multiverse style glimpse into what could have been. The repeal of the repeal effectively means business as usual as it has been since 2017 for the public sector and 2020 for the private sector whereby the end client has the responsibility to assess and then pass down an SDS (Status Determination Statement) and the fee payer carries the majority of liabilities. Cancelling the Off-Payroll Working Rules repeal seems, dare I say it, like a ‘blanket approach’ to all of Kwasi’s Mini Budget points and this one in particular won’t help the growth of the economy which relies heavily on flexible workers in the UK labour market, the repeal had the potential to serve as a catalyst to economic growth it’s unfortunate that we came so close to this being a reality but are unfortunately left with a piece of legislation which was never really fit for purpose. Whilst IR35 is incredibly complex I will continue to advise that accurate and fair assessments are and always have been the way forward, ensuring those who are genuinely outside of IR35 can continue to work in that manner.”

IR35 specialist, Qdos, also responded to the news. Qdos CEO, Seb Maley, said: “I’m lost for words. The chaos, uncertainty and disruption caused by the mini-Budget is unprecedented. While U-turning on some tax cuts made sense, cancelling the repeal of IR35 reform is the wrong decision at the wrong time. It’s a knee-jerk reaction from the government and, in my opinion, won’t benefit the economy. IR35 reform damages the flexibility of the UK labour market, which is key to economic growth. Many contractors left the sector after risk-averse businesses stopped engaging them. Repealing reform would have opened the floodgates – a catalyst for the recovery of this sector.

“With IR35 reform now remaining in play, businesses must continue prioritising compliance. The legislation is complex and navigating it can be a challenge, but with the right approach can, in fact, be managed.”

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Contractors will once again be responsible for determining their employment status

Big news came for the contractor workforce last week when Chancellor Kwasi Kwarteng used the mini-Budget 2022 to repeal IR35 reform in both the public and private sectors, stunning and delighting the contractor sector in equal measure.

Mr Kwarteng said IR35 reform had imposed “unnecessary cost and complexity” for “many businesses,” so it will be repealed, “as promised by Prime Minister, Liz Truss.

In fact, during her campaign, Liz Truss only promised that the off-payroll rules would be reviewed, however that’s not stopping the contractor sector celebrating that all IR35 status decisions will be reverting to them from April 2023.

At chapter 3.44 of Mr Kwarteng’s Growth Plan, the government states: “From this date, workers providing their services via an intermediary will once again be responsible for determining their employment status.

“And [they will be responsible for] paying the appropriate amount tax and National Insurance contributions.

“This will free up time and money for businesses that engage contractors, that could be put towards other priorities.”

Matt Fryer, Managing Director at Brookson Group, a People2.0 company, commented on what this means for recruiters. He said: “The U-turn will be welcomed by recruiters as it removes a significant compliance risk form their business and their clients. This should help to unlock the potential of flexible workforces at a time of increasing demand for highly skilled temporary workers, particularly in industries such as IT, engineering and energy. It does not, however, remove all compliance risk from resourcing contingent workers.”

Neil Carberry, CEO at REC also commented: “It is not enough to simply tear things down though – we also need to build. On IR35, retained European regulation, investment zones and infrastructure there is hard work to do on replacement rules, and in some cases little time to do it. Business is ready to help – but we will need action from Government to make things happen. Nowhere is this truer than on skills, where the failure to reform the failed Apprenticeship Levy continues to hold back employer training investment. Reforming the Working Time Directive allows us the opportunity to preserve rights on holidays, breaks and working weeks while removing the administrative nightmare faced by firms in calculating how they comply with the current rules, which were not designed for today’s economy. But we need to move quickly to do this, given the chaos that has been created by some recent court judgements.

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Late payments from suppliers and payroll system issues cited as reasons for delays

Despite contract work being on the rise since the pandemic, freelancers often wait three times longer to get paid than full-time staff who earn a monthly salary. Research shows that this is due to firms struggling with cash flow and payroll issues.

The survey, conducted by embedded finance and payment solutions provider, Sonovate, showed that 53% of all small and medium-sized businesses (SMEs) use contractors. However, this number increased to 81% when looking only at medium-sized businesses.

More than a quarter (27%) of SMEs said it takes them over 90 days to pay their contract staff. This figure increases to 37% among medium-sized businesses (50 to 249 employees), even though they are expected to have more predictable cash flow and should be able to make more timeous payments.

Five hundred senior business decision makers were surveyed, and it was discovered that 28% cited cash flow as one of the main reasons for slow payments (rising to 33% among mid-sized enterprises). It was also found that 62% believed that these cashflow issues were caused by the knock-on effect of late payments from their suppliers and customers. Twenty-eight percent said that issues with payroll systems stopped them from paying contract workers on time.

Regardless of the clear need for good contractors, 39% agreed that failure to pay timeously might result in missing out on quality talent. A further 24% admitted they had lost contract workers as they couldn’t pay them on time.

Richard Prime, co-founder and co-CEO at Sonovate, said: “Despite the last few years accelerating the number of workers going freelance or contracting, they are consistently being paid late which is not sustainable for many people –  particularly at the moment.”

“We know that contract workers are the future of the UK’s workforce, but with the cost-of-living crisis front of mind, 90 days is just absurdly long to wait for payment. Against the backdrop of this crisis, it is paramount that businesses have access to solutions that support them to offer fairer and swifter payment across the workforce supply chain.”

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Launch in response to increased demand for contractors

Recruitment business Camino Partners announced this week that they have launched an interim finance division. The new division has been set up in response to the increased demand for contractors across their key markets.

The interim desk will place finance professionals into both the Camino Partners and Camino Search brands.

Managing Director Harry Hewson has set up the interim desk in reaction to the increased demand for contractors across their key markets.

The new division will be headed up by Sam Nelan, Joe Hamblin, and Jordan Hopewell.

Harry Hewson, Managing Director of Camino Partners, commented: “The pandemic has seen a paradigm shift in how businesses operate, and the way employees now want to work has changed rapidly. Many professionals are placing higher value on working from home and flexible working, to fit around their lives. We are also seeing that many companies are going through periods of restructure or growth. Contract work offers Interims more flexibility and autonomy, whilst allowing high quality finance professionals to effect change in an impactful manner. We have launched this desk to support our network.”

Sam Nelan, Talent Partner at Camino Partners, commented: “We’re excited to be launching the new division; we’re already working with exceptional talent and some extremely impressive businesses”.

Joe Hamblin, Talent Partner at Camino Partners, added: “Placing interim roles offers a great opportunity for us to have a positive impact on rapidly-scaling businesses.”

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