Crystal Umbrella

Global technology research giant Gartner has predicted that worldwide spending on information technology will rise by 3.7% in 2012, a forecast which may bring a cautious smile of optimism to the faces of many PAYE umbrella techies who make their livings through IT contracting.

If the projection is borne out, IT spending will rise to £2.45 trillion during 2012, with companies investing in new IT solutions to help them secure much-needed growth. This represents a significant advance on last year’s figure of £2.38 trillion but is still lower than Gartner’s earlier estimates for 2012. Last year, the firm predicted growth of 4.6% in 2012, but downgraded the forecast in response to several impeding factors, such as the continuing Eurozone crisis and the floods in Thailand.

Even so, the revised 3.7% figure is distinctly better than some pundits had projected and, if realised, will see spending increase on all four of the major technology sectors (telecommunications equipment and services, computer hardware, enterprise software and IT services). For contractors, this boils down to more opportunities in the IT skills market.

Revenue from enterprise software is expected to increase by 6.4%, while that generated by telecom equipment is expected to rise by 6.9%.

Richard Gordon, Vice President of Research at Gartner, explained that the floods in Thailand will dent the production of hard drives; the country is a major hub for hard drive manufacture as well as other components. The disaster, which ruined many manufacturing centres, could well see production drop by as much as 25% over the coming six to nine months.

Contractors working through umbrella companies may need to adjust to much shorter temporary contracts if soundings from a poll by APSCo are borne out.

Thanks to the Agency Workers Regulations, which went live on 1^st October last year, 29% of employers plan to end contracts before the twelve-week limit that entitles temporary staff to equal employment rights with their permanent counterparts.

Commenting on the survey, APSCo’s Director, Ann Swain, said that AWR “is definitely having an impact on all areas of the market.” Christmas Eve marked the occasion of the first ever qualifying limit, and if the poll proves accurate, Swain believes that “tens of thousands” of temporary contractors could be without work by the end of January.

According to Phil Hutchinson, the Operations Manager of the recruiter G2, a number of clients have already begun terminating temporary contracts as the 12-week limit nears. Several PAYE umbrella contractors have been offered permanent posts or received offers to “buy them out” of their contracts.

The news isn’t all doom and gloom and the 29% figure may in fact reflect adjustment anxieties amongst some employers. The fact remains that PAYE umbrella contractors are usually prized by the employers who hire them because they are known to be highly skilled and efficient; the same poll revealed that less than a fifth of employers believe that the AWR will cause demand for contractors to drop.

As the REC has consistently maintained, measures do exist to enable employers to retain valued contractors beyond the ‘cut-off’ point, without incurring extra costs. Employer education about these options remains a pressing priority, the REC argues.

PAYE umbrella techies earning their daily bread through IT contracting may be interested in the latest trends in the IT skills market as recorded by Freelancer.com’s Fast 50 (a quarterly list of the 50 fastest growing IT jobs) for the last three months of 2011.

HTML5 jobs soared by 41% on the previous quarter, hitting 1,585 postings on the popular crowdsourcing and outsourcing site. In comparison, Adobe’s Flash yielded more jobs (2,995) but grew by a relatively feeble 6%. Freelancer.com believes that, by mid-2012, HTML5 will have overtaken Flash if this trend continues.

Software development roles in general were up substantially on Q3, with applications developed for C++ surging by 38% to 2,214, Java leaping by 36% to 2,513, and C language jobs rising by 27% to 2,124. PHP, however, still dominates the Web, with 28,872 projects (a growth of 13%).

Although its performance during Q3 was a little lacklustre, mobile platform Android saw a healthy rise of 33% in Q4; Freelancer.com thinks it’s set to overtake the Apple iPhone by the end of this year vis-à-vis the rate of development of applications. By comparison, Symbian and Windows applications barely registered in the data.

Overall, the last quarter of 2011 saw a rise of 33% in the number of IT roles on offer, bounding up from 114,000 jobs in Q3 to 134,820.

Commenting on the data, Freleancer.com CEO Matt Barrie said “The sophistication and nature of jobs continues to amaze us as we see jobs outsourced in areas as diverse as astrophysics, genetic engineering and industrial design.”

Banking and financial services contractors working through umbrella companies and limited companies alike have been through tough times over the last few months and the latest announcement from RBS of another job-axing round can hardly have cheered them. However, according to an industry expert, the news may not be as bad as it sounds.

RBS will shed 3,500 jobs from its 19,000-strong investment banking wing, bringing the total number of jobs axed by the bank since 2008 to 35,000. All trading in shares and all takeover advice to other companies will now cease. Investment banking has taken a double hit recently, with rigorous new rules on capital requirements and the continued financial crisis converging to squeeze the sector until the pips squeak, to resuscitate a phrase from the 1970s.

However, Steve Yendell, the Executive Director of the City recruitment agency Selby Jennings, maintains that the RBS “adjustment” was not unexpected and was actually less severe than many had supposed. Adventurous opportunity-seekers may wish to consider relocation to more buoyant financial markets, such as those in Asia and Latin America, Mr Yendell added, although those who wish to remain in London and Europe will undoubtedly face more of a challenge.

However, highly skilled banking workers, including PAYE umbrella contractors, are likely to find it relatively easy to find new opportunities. In addition, growth in non-financial banking organisations and in other banks is expected to be strong enough to absorb the latest casualties. This is one storm cloud that may just have a silver lining.

PAYE umbrella contractors are occasionally asked by some recruiters to undergo psychometric testing to determine their suitability for various roles. However, a specialist workplace assessment group has raised concerns about recruiter misuse of the tests.

Talent Q believes the problem is getting so bad that some recruiters are in danger of spoiling their employer brand unless they smarten up fast. Although more and more organisations are turning to psychometric testing to identify the strengths and weaknesses of candidates for advertised posts, the group has received evidence that some recruiters fail to explain the relevance of the test to applicants, an omission which is at the very least discourteous. Placement-hunting contractors working through umbrella companies, along with other applicants, are entitled to a little respect. Perhaps more seriously, they also fail to give any feedback to candidates after the test, which is in fact a clear breach of the requirements of the British Psychological Society.

Not only this, but data storage is often decidedly messy, with no central records being kept and much duplication occurring. Unsurprisingly, this fosters frustration in candidates, who could be forgiven for assuming that the employment agency is inefficient. Candidates, Talent Q insists, should also be given feedback following unsuccessful applications; in the absence of this, they are inclined to assume the test result was their downfall, but other factors are often the real reason.

Steve Dell, Talent Q’s Chief Executive, said that good practise requires that candidates receive an explanation about what psychometric assessments are designed to achieve. They should then be helped to proactively plan for the test. Feedback, he insisted, should be given throughout the application process.

Recent comments from the Prime Minister and Deputy Prime Minister have renewed hopes that IR35 may be destined for an earlier dispatch to the knacker’s yard than many contractors had supposed.

There’s a certain amount of ‘reading the runes’ involved here but, while talking to a group of small business entrepreneurs last Thursday, David Cameron mentioned three critically important words: general anti-avoidance powers. This is what he actually said while addressing the issue of tax avoidance:

“I think we need a tougher approach, one of the things we’re going to be looking at this year is whether there should be a more general anti-avoidance power that HMRC can use.”

The significance of this remark lies in the fact that, if he were serious, the implementation of a General Anti-Avoidance Rule (GAAR) – which New Zealand and Canada have already achieved – would render IR35 wholly superfluous. Many pundits consider this to be a vastly more preferable alternative to the UK’s IR35 regulations, not least because GAAR hinges on a set of principles rather than on hard-edged rules.

Contractors working through their own limited companies tend to favour the GAAR approach because it allows fresh case law to be set down around disguised employment rather than, as now, recycling inflexible definitions. Such a move could assist HMRC to avoid making the abundant mistakes they have accumulated in the past over their policing of IR35.

Nick Clegg, speaking on Radio 4’s Today show on the same day, said:

“There should be a general rule that you cannot play the system. We have received a report from an expert, Graham Aaronson, which says an anti-abuse rule is feasible.”

An in depth examination of the debatable Business Record Check plan – whereby small companies may be penalised by up to £3,000 for having inadequate paperwork – has now begun, HMRC has declared.

Acknowledging “considerable concern” in regard to the spot-checking motivation, HMRC stated that it had begun a necessary review of BRC in discussion with the professional bodies that are criticising its execution. Even though the plan won’t be stopped, which means that the earlier announced preliminary trials are continuing, the majority of tax consultants say that the responsibility is with the Revenue to prove that BRCs are capable of “something sensible”.

Tax expert Nichola Ross-Martin explains that this is partly as a result of the tax bodies that are asked to consult presently enjoying ministerial assistance under a separate motivation to boost HMRC’s performance. However, it is additionally due to the fact that they feel that the BRC method isn’t the easiest way to assist small and medium sized companies in maintaining good data, which was the original purpose of the plan, advised the Institute of Chartered Accountants of England and Wales.

Its tax facility stated “We are concerned that HMRC may set unrealistic criteria for small business records and that BRCs will place a considerable compliance burden on SMEs and their advisers.”

A statement was released by the HMRC prior to the New Year where it publicly stated that it had not got everything correct, declaring the plan could have without a doubt “benefited from more detailed consultation at an earlier stage.”

Most contractors working through umbrella companies will share widespread concerns about the UK’s economic prospects in 2012, although those with experience in the service sector can at least draw some comfort from a new survey conducted by Markit and the Chartered Institute of Purchasing and Supply.

PAYE umbrella contractors working in the sector may already have noticed that demand has been keen in recent weeks, an impression confirmed by the survey, which shows that activity climbed healthily last month. In fact, in December, the sector saw its highest activity rate since July, according to the Purchasing Manager’s Indexes.

Other trends noted in the report include the first rise in growth for nine months across all three categories of the engineering sector (housing, commercial and civil engineering). Meanwhile, manufacturing managed to reverse the contraction it suffered in November, although it didn’t quite make it into positive growth during December.

Even so, hiring intentions and business expectations remain low, with those polled expressing about the same level of caution as during the two-and-a-half-year low recorded in September. This may well be to the advantage of the jobbing contractor, however, as businesses may prefer hiring skilled temporary workers to deal with specific projects rather than risk appointing permanent staff while economic conditions still look so choppy.

Markit’s chief economist, Chris Williamson, said:

“Service sector companies reported surprisingly buoyant business conditions in December, with activity and new business growing at the strongest rates since July. The December survey rounds off a reasonable fourth quarter for the service sector, which is likely to again provide the main stimulus to overall economic growth.”

Recruiters have expressed concern about a “lack of co-operation” from clients in relation to the Agency Workers Regulations, the REC reports.

Contractors working through umbrella companies and limited companies alike have been keeping a keenly tuned ear open for news of the impact of the AWR, especially since the equal treatment measures kicked in for the first time on 24^th December. The REC reveals that the anticipated flurry of queries and request for information from workers has not emerged, but some clients have been less than forthcoming in supplying relevant data to their agencies.

REC Solicitor and Head of Professional Services, Lewina Farrell, said:

“As predicted, the world did not suddenly come to an end on 24^th December. We will monitor the situation closely over the next few weeks and continue to ensure that recruiters are properly briefed in terms of handling any queries or claims from workers.”

“Relatively few calls came into to the emergency legal helpline over the Christmas period, which is a good sign. However, the feedback from members confirms that some clients remain reluctant to share relevant information for equal treatment purposes with their recruitment partners. An immediate priority is to continue reinforcing the message that the AWR is an issue for both agencies and clients.”

Ms Farrell went on to warn that employment tribunals will hold clients who fail to provide relevant information to their agencies liable for any breaches of the AWR which arise through their unwillingness to co-operate. She added, “…it is everyone’s interests to develop effective communication channels and imperative that clients pass the appropriate information to their recruitment partners in a timely fashion.”

PAYE umbrella contractors with interim management experience are enjoying a large surge in demand, as banks seek senior to staff to help them sell non-core businesses and loan portfolios, according to the specialist recruiter Interim Partners.

An Ipsos-MORI poll conducted for the Interim Management Association reveals a 22% rise between Q1 and Q3 last year, with 562 new interim management assignments emerging in the three months to 30^th September 2011. This marks a substantial step up from the preceding period (between June and August), when only 431 such assignments appeared.

Contractors working through umbrella companies who have experience in this field will be aware that interim managers are lucratively-paid senior executives who are recruited on temporary contracts to manage specific but complex tasks. They can command between £1,000 and £2,000 per day – hardly surprising, given that they’re nearly always just below board-level.

It seems that banks and other companies remain reluctant to fill gaps in their management teams with permanent appointees in the current fragile economic conditions. Interim Partners Managing Director, Doug Baird, said most firms are endeavouring to make themselves “as lean as they can” in response to the continuing crisis in the eurozone. He added:

“That is creating demand for interims with experience of going into a businesses and taking out any non-core costs in a way that has the least possible impact on customers and staff morale.”

The Director of Financial Services at Interim Partners, Andrew McIntee, explained:

“One new area of demand is for interims that have the experience to help banks work through the restructuring of their large portfolios of distressed debt.”