Crystal Umbrella

An intriguing development this week may result in a surge in demand for PAYE umbrella contractors working in the IT skills market.

New calculations from internet leviathan Google forecasts that, over the next five years, the UK will see the creation of 365,000 new jobs as a direct consequence of British firms exploiting the internet successfully. The figure was calculated by Google’s in-house economists, based on predictions for the UK’s GDP growth over the next four years (2011 – 2015).

Commenting on the estimate, Google’s European CEO Phillip Schindler said that, if anything, the economists were even being somewhat “on the conservative side” in their forecast. The facts suggest that, despite difficult general economic conditions, the web’s most successful operators have continued to grow strongly. The internet now accounts for a sizeable one fifth of GDP growth.

Mr Schindler urged government ministers to do more to encourage this tech-revolution. He said “From what I have seen I think the government really understands there is a need to drive technology and innovation. What are the areas I would double-down on? The first one is to lower the barriers to innovation. A government – rather than saying where I regulate – should rather say how can I protect and actively create the space for innovation.”

Google is leading the way on this issue and plans to expand its base in the UK, beginning with new jobs at the company’s third UK office in Soho.

If the forecast is accurate, experts in IT contracting could be in for a busy and lucrative time.

A dispute between the Royal Bank of Scotland (RBS) and Britain’s trade union, Unite, has highlighted the upsurge in contractor payroll in the UK. Whilst RBS has cut large numbers of permanent staff, an email leak over the bank holiday has revealed that around 3,000 freelancers are currently being used by the bank. However, Unite slammed the news, arguing that contractors should not be used in replacement of permanent members of staff.

The argument stems from a leaked email from Hays, the recruitment agency, reminding contractors to submit timesheets before the weekend of the latest bank holiday. Criticising the move to increase contractor payroll instead of having permanent employees, Unite’s national officer, David Fleming, said “It is wholly inappropriate that RBS, backed by taxpayers, appears to be throwing money at thousands of contractors.”

Freelancers association PGC however hit back at the criticism of RBS, expressing that it was a ‘knee jerk’ reaction. The Deputy Chairman of the group, James Collings, explained “RBS, in common with many organisations throughout the UK, see the merit in using a skilled and flexible freelance work force when and where there is a demand for their talent and paying these businesses a market rate.” He added that, with one in 20 now working as a freelancer, the contractors’ community was on the rise and had every right to be employed by corporate companies such as RBS. Whilst Mr Collings expressed concern at the leaked Hays data, he made it clear that contracting in the UK is becoming more prevalent than ever.

It has been revealed by the Recruitment and Employment Confederation (REC) that, with many companies reducing their plans to expand permanent staff, independent contractors are set to benefit. With the economy’s future remaining uncertain, the next quarter will see more temporary workers taken on as firms look at payroll outsourcing and IT contracting instead of having in-house staff.
With the economy remaining turbulent, it was shown that, in respect to staffing over the next three months and indeed the next year, plans envisioned at the start of the year to add employees to firms are to be downgraded. The result will see increasing work for temporary staff and independent contractors.

Director of research at REC, Roger Tweedy, explained that the downgraded company plans were an indication of the “uncertain economic context.” He added “With the economy continuing to stagnate, businesses will understandably remain cautious, which is why we are seeing an increase in the longer term demand for flexible staff, such as temporary and contract workers.”

With 83% of firms revealing that contract workers would stay at current levels or increase over the coming year, the future looks bright for contractors. Over the next quarter alone, 79% of employers said temporary staff would be boosted or held steady at a minimum. With payroll outsourcing and IT contracting two specific areas that are being utilised by firms to cut costs, those in these sectors are set to see rising amounts of freelance work.

It has been revealed in a new survey that up to three quarters of small business owners find it difficult to go on holiday and leave their work concerns at home. With many freelancers providing ongoing services for a range of companies, sole contractors also feel concerned, finding that they are unable to relax whilst away. Whilst umbrella companies offer the ideal support for contractors, the uncertainty of long-term work keeps many individuals from unwinding fully.

The news comes after Intuit, the accountancy software provider, revealed results of its latest survey. 72% of small business owners worked whilst away, with a seventh admitting they spent less time relaxing than they did working. In addition, 22% of those questioned admitted that their first day back in the office left them more stressed than they had been before going on their break.

With many of these concerns also relating to the freelance market, Inuit revealed that ‘work-cations’ were increasing in prevalence, with individuals going on holiday but taking mobile devices and laptops with them so that they could work whilst away. Managing Director of Intuit UK, Pernille Bruun-Jensen, said “Everybody needs to take time off now and then but our findings show that small business owners never switch off, even when they could really do with switching off. Rather than not taking a break at all, many of them are choosing to take their business away on holiday with them.” With umbrella companies seeing a rising number of people in the freelance field, more people than ever are expected to be indulging in work whilst away.

PAYE umbrella contractors with expertise in the IT skills market should consider placements with small tech firms, according to one expert who believes they provide exciting opportunities for tekkies.

Ian Hogarth, the Chief Executive Officer of the music website “Songkick,” claims that smaller companies emerging in the technology sector can deliver a stimulating and stable working environment for freelancers specialising in IT contracting. Songkick itself represents one of the success stories for such firms – launched only four years ago, it’s now a thriving enterprise.

But Hogarth’s invitation came with a note of caution: economic circumstances remain extraordinarily difficult for small businesses in particular, and small tech firms have not received sufficient government support at the crucial start-up phase. With government backing, however, he believes they could easily become a highly attractive option for the UK’s best IT talent.

He urged the coalition to do all in its power to assist start-up tech firms to flourish. This would help stop the bigger companies from mopping up all the leading IT talent and help the crucial smaller business sector to drive employment upwards. He said, “We’d like to see the government promote start-ups as a stable, legitimate and exciting option for graduating software engineers.”

Hogarth drew attention to a disturbing fact – even though the UK has some of the finest educational institutions for engineering in the world, most of the country’s top engineering graduates end up joining a management consultancy or a bank. Too many IT graduates think that jobs in software development with a new company are still too risky and they want a more secure option. Adequate government support would dispel this fear, Hogarth believes, and attract talented software engineers – the “lifeblood of tech start-ups” – toward working in new firms.

IT contracting in the financial services sector continues to have decidedly healthy prospects, new research suggests.

The study from the contractor service provider Giant Group suggests that insurance firms and banks are boosting their IT expenditure, a development that hasn’t gone unnoticed by many PAYE umbrella contractors in the IT skills market. A third of IT contractors believe that it will be the financial services sector where most IT jobs will be found in the coming year – a significant rise from the same time last year, when only 8% of those polled felt that way.

The number of contractors anticipating that the public sector will produce the most jobs has virtually halved, plunging from last year’s 17% to today’s 9%. In 2008, the proportion was a positively buoyant 30% but the government’s austerity measures have since taken the wind out of the public sector’s sails. With public sector opportunities evaporating, the finance sector is becoming considerably more important to specialists in IT contracting.

Experience and skills in cloud computing will be especially in demand, according to the Giant Group’s Managing Director, Matthew Brown, who believes the evidence now suggests that banks are “ramping up spending again” after the recession, during which they pulled out of many IT projects.

In addition to efforts to improve productivity through cloud computing, banks also have to deal with new regulations aimed at making them more transparent. Brown believes this, too, is driving demand for IT contractors.

The research heralds a welcome change in fortune for IT contractors, who suffered acutely during the depths of the financial meltdown.

The latest Report on Jobs published by REC and KPMG may not cause many PAYE umbrella contractors to break open the champagne, but it brings modestly encouraging new nonetheless. Recruiters reported that contractors working for umbrella companies were still in demand during July, with both temporary billings and permanent placements rising moderately.

Pay rates also rose from the low-point reached in June but remain subdued. Contractors in the IT skills market will be reassured to find that workers in that sector, along with engineering and construction, were the most sought after. Moreover, the supply of permanent candidates reached the best level in 18 months, while temporary availability hit its strongest point since February.

Commenting on the figures, the REC’s Chief Executive Kevin Green said ”This month’s Report on Jobs shows that the rate of jobs growth in July quickened from June’s figures. These figures show that the jobs market is continuing to perform well despite general weakness in the UK economy.  We have now had two years of continuous growth and employers are still continuing to hire staff, albeit not in the numbers needed to radically reduce unemployment.”

Mr Green added that the key reason why employment is continuing to grow even in difficult economic circumstances is the UK’s flexible labour market – employers are increasingly turning to temporary workers and “continue to see the value of using a flexible workforce.”

KPMG Partner and Head of Business Services, Bernard Brown, noted that, although the jobs market hasn’t deteriorated, employers in all sectors continue to be cautious about taking on new staff. Government cuts and falling real wages continue to depress domestic demand, he added.

The latest Report on Jobs published by REC and KPMG may not cause many PAYE umbrella contractors to break open the champagne, but it brings modestly encouraging new nonetheless. Recruiters reported that contractors working for umbrella companies were still in demand during July, with both temporary billings and permanent placements rising moderately.

Pay rates also rose from the low-point reached in June but remain subdued. Contractors in the IT skills market will be reassured to find that workers in that sector, along with engineering and construction, were the most sought after. Moreover, the supply of permanent candidates reached the best level in 18 months, while temporary availability hit its strongest point since February.

Commenting on the figures, the REC’s Chief Executive Kevin Green said ”This month’s Report on Jobs shows that the rate of jobs growth in July quickened from June’s figures. These figures show that the jobs market is continuing to perform well despite general weakness in the UK economy.  We have now had two years of continuous growth and employers are still continuing to hire staff, albeit not in the numbers needed to radically reduce unemployment.”

Mr Green added that the key reason why employment is continuing to grow even in difficult economic circumstances is the UK’s flexible labour market – employers are increasingly turning to temporary workers and “continue to see the value of using a flexible workforce.”

KPMG Partner and Head of Business Services, Bernard Brown, noted that, although the jobs market hasn’t deteriorated, employers in all sectors continue to be cautious about taking on new staff. Government cuts and falling real wages continue to depress domestic demand, he added.

As the deadline for the implementation of the Agency Workers Regulations draws ever closer, contractors working through umbrella companies and limited companies alike may welcome the publication by the REC of a second batch of model contracts which are fully compliant with the new legislation.

The contracts are a key component of the REC’s AWR Advisor Toolkit, which was launched last week, and represent the culmination of the organisation’s efforts to help its members prepare their staff, agency payroll workers and clients for the activation of the new rules on 1^st October. The latest documents include Inside IR35 and PAYE model contracts (Contracts 3-8) as well as model contracts for the Swedish Derogation option.

The REC’s Head of Professional Services, Lewina Farrell, said that the organisation’s legal team had undertaken a “mammoth task” in updating all the model contracts to comply with AWR. “We had been working on the contracts for some considerable time to ensure they were all fit for purpose for our members. The contracts released today are for those workers who will be agency workers for the purposes of the AWR,” she explained.

With only a few weeks left before the implementation of the EU directive, forward planning has become increasingly urgent. The model documents should help all individuals and agencies affected by the legislation to move into the new, post-AWR era relatively smoothly.

Recruiters in Northern Ireland are not yet included in the latest REC publication, as the Department for Employment and Learning (DELNI) has not yet finalised its AWR guidance. As soon as it does so, Ms Farrell advised, Northern Ireland recruiters would receive their final documents from REC.

The economic role of freelance contractors working through umbrella companies and limited companies was highlighted this month by the PCG at the All Party Parliamentary Group (APPG) for the freelance sector.

The PCG’s aim was to generate discussion on how the Government can strengthen the economy by embracing the flexible working model exemplified by these often highly skilled workers.  The event, the first roundtable of the APPG, took place at the House of Commons and was attended by representatives from trade associations, business leaders, and academics.  It was chaired by Brian Binley MP.

John Brazier, PCG’s Managing Director, told the meeting that the UK’s freelance workforce today numbered at least 1.4 million, covering all industries from media to construction.  “We believe this figure is increasing and is adding value to the economy in a time of slow growth.  Now is the time to come together and work with Brian and the APPG to highlight these issues.  This event will allow the APPG to produce a report to raise awareness of freelancing in Government and amongst policymakers,” he said.

The meeting also heard from Professor Andrew Burke, founder and Director of the Bettany Centre for Entrepreneurial Performance and Economics, who explained that the task of securing wider appreciation of the role of freelancers had been hampered by a lack of research that could validate their economic importance.  The PCG responded by pledging to address the issue in the months ahead, aiming to produce new research in time for the next National Freelancer’s Day on 23^rd November.

The APPG aims to compile a report on “The Value of Freelancing” and present it to MPs in the autumn.