Tag: Contractor

Businesses looking to engage tech contractors may need to rethink their pay rates and conditions, according to new research by Hays Technology.

A survey carried out by the specialist IT recruitment agency in May polled more than 600 contractors and hirers and was used to put together its UK Contractor Day Rate Guide 2021.

The research revealed that demand for technology expertise is increasing, but that skills shortages are hindering many firms’ efforts to hire talent. It reported a 21% increase in demand for IT contractors and a 17% increase in placements from H1 to H2.

Of the organisations polled, 42% said they did not have the required talent to achieve their current business objectives and more than 8 in 10 reported they had found it difficult to recruit contractors over the last year.

This supply and demand mismatch has led to day rate increases for many contractors, with some  project and change managers achieving increases of more than 10%. Overall, data gathered by Hays offices across the UK showed that technology day rates had increased by 0.8% over the last 12 months. Software developers had seen an average day rate rise of 2.4%.

James Hallahan, Director of Hays Technology in UK & Ireland, said: “Skills shortages abound in the technology sector and there are plentiful opportunities for tech contractors to be deployed within organisations that can’t find enough permanent employees with the right skills. Contractors with the most sought-after technical and soft skills, and those with a proven track record for successfully managing projects and leading change are going to expect assignments that deliver on flexibility and terms.”

Beyond pay

However, the Hays research also found that contractors wanted more than just pay increases: the majority now also wanted to be able to work remotely.

Many were already working from home for some of the time and more than half said their work-life balance had improved since March 2020, with almost three-quarters reporting that being able to work remotely was important to them.

Almost half (46%) now want greater flexibility with regard to hours and two in 10 said they wanted to change the expectation for them to work outside of their contracted hours to enhance their work-life balance.

The thorny issue of the IR35 reforms that were introduced in April remains a sticking point between contractors and hirers, found Hays.

“Most contractors want to stay outside of PAYE, presenting a potential shortage for organisations seeking to secure their skills. So, while the increase in activity means there is great demand for tech contractors, organisations are having a difficult time engaging with them. They may need to take an assignment-by-assignment view in order to attract the right skills and work with a recruitment specialist to help them secure the best talent,” said Hallahan.

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The Freelancer & Contractor Services Association (FCSA) has launched revised Codes of Compliance, which it says are tougher and even more transparent than previous versions.

Following a review that took five months, the new codes provide added assurance to agencies, hirers and contractors, according to the FCSA.

In particular, member firms must now provide more transparency to contractors, particularly in relation to holiday pay in umbrella employment contracts and on payslips.

Umbrella companies have come under repeated fire this year, with claims some unscrupulous providers withhold holiday pay and other benefits owed to workers. In April MP Ruth Cadbury went as far as to call for umbrella firms to be banned due to “significant malpractice” in the industry.

Legitimate umbrella providers have argued, however, that especially given the introduction of new IR35 rules earlier this year, there’s a clear need for such structures.

“As market conditions change so too must our codes,” said Phil Pluck, the FCSA’s Chief Executive. “This is to ensure the highest standards of compliance are continued to be met by our member firms. Which is why now, we’re announcing the launch of our latest Code revisions.

“The most comprehensive and compliant set of evidence-based standards now exist in our sector. No one else in the sector can give contractors or the supply chain this level of assurance.”

The FCSA has also introduced new pre-requisite and due diligence checks on all new applicants, which must be passed before proceeding to the accreditation assessment stage.

It said each step in the assessment process is conducted by independent and regulated accountants and solicitors, all with considerable experience in the sector. No member of FCSA staff, the board or membership are involved in this process.

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The co-chair of the Loan Charge APPG report on the contracting industry has effectively called for an end to umbrella companies by suggesting the government strike out part of its Finance Bill.

Speaking in parliament the week after the APPG’s How Contracting Should Work document was published, Ruth Cadbury MP launched a scathing attack on the umbrella industry.

“The unintended consequences of IR35, off payroll legislation, has been a proliferation of umbrella companies, some of which have pushed people into disguised remuneration schemes,” she said.

She added that the APPG report had, “exposed significant malpractice, including withholding holiday pay and kickbacks for recommending or passing on contractors, even including providing fitted kitchens and holidays for recruitment agency directors”.

Opportunity for change

While she said that long term an alignment of tax and employment laws was needed, Cadbury suggested the government now had an opportunity to stamp out bad practices by making changes to Clause 21 of the Finance Bill, which deals with workers provided by intermediaries.

“The government could simply strike out Clause 21, which would then ensure workers got the agency rights they should be getting. Agencies can run their own payrolls, they do for their own staff anyway, they do not need umbrella companies and neither do their contractors.

“Or, the government could redraft Clause 21 to seek to stop the exploitation but they must do one or the other.”

She said some schemes were not transparent about tax avoidance during the sales process and had caused “misery” for workers.

“The government and HMRC are well aware schemes are still being mis-sold to people, including mid and low paid public service workers, nurses, doctors in the NHS and other clinical specialists, teachers and social workers. And also many in the private sector, IT, business services and so on.”

Levelling the playing field

However, Dave Chaplin, CEO of contracting authority ContractorCalculator, said he did not think it was likely the government would follow Cadbury’s suggestion. “Why should the honest umbrella companies suffer because of the few that are up to no good,” he asked?

“The alternative option is to update the existing Finance Bill to rule out skulduggery, and make all umbrellas operate on a level playing field. That would be the more sensible way forward, and there are some options that might be possible.

Crawford Temple, CEO of Professional Passport, expressed a similar view. “Closing down a whole sector that provides such crucial support to the entire contingent workforce would be an over-reaction. We agree with Ruth Cadbury and have indeed been making the point to HMRC for many years that limiting the ability of disguised remuneration and non-compliant operators to enter the market is essential.

“However, the proliferation of these arrangements is a direct consequence of ill-thought through legislation with the responsible stakeholders in the sector all aligned on highlighting these problems in their responses to previous consultations that have been ignored.

“I would suggest that a collegiate and joined-up approach is what is needed right now to drive up standards and stamp out the unethical practices that are giving the entire sector a bad name.”

More enforcement needed

Phil Pluck, chief executive of the Freelancer & Contractor Services Association, which gave evidence to the APPG for its report, added that it is not only regulation but also enforcement action that is needed.

“The key suggestion is that regulation should apply to the umbrella sector, which the FCSA has been campaigning for for a number of years. But we would go further and say that this also requires robust and visible policing. HMRC are caught between maximising tax revenue and prosecuting tax avoidance criminals. This conflict means that not enough prosecutions end in convictions and not enough directors see the inside of a prison cell.”

He said IR35 reform made this need all the more pressing. “The IR35 reforms will see an increase in contractor numbers and an increased opportunity for unscrupulous agencies and umbrella firms to further exploit this population.

“The FCSA is already looking at how it can bring in greater compliance standards in order to create a more transparent and fairer playing field for these workers but the government must stop dragging its heels on regulation and the resources to prosecute unlawful elements in this market.”

Clarke Bowles​, Director of Strategic Sales at Parasol Group, backed the call for more enforcement. “Investing time pressing government for a single enforcement body helping to drive proper regulation would be far more effective than making sweeping statements about an entire industry, most of whom uphold very high standards of compliance.”

Overly simplistic

Bowles added that Cadbury’s dismissal of the need for umbrella companies was misguided. “A quote from Ruth during the speech said ‘The legislation as originally drafted would have meant that the agency would have to put the worker on their own payroll where they would have enjoyed the protections of existing agency legislation.’

“This ignores the fact that agency workers employed by a compliant umbrella company already enjoy and benefit from full employment rights. Whilst there is no obligation on the fee payer to offer employment rights, adopting this strategy could create large numbers of zero right employees, creating a much bigger issue.

“Ruth suggests that clause 21 be struck out and recruitment agencies run their own payroll ‘as they do anyway for their own staff.’ This completely ignores the complexity of fee payer responsibilities, deductions and the benefits for temporary workers that come with the continuity of employment, benefits packages, employment rights and protections.

“In addition, not all recruitment businesses are able to run their own payrolls, many simply do not have the resources, infrastructure or expertise to do so.”

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