Crystal Umbrella

If you are on the lookout for new opportunities in the world of IT contracting, the REC has some encouraging news for you: the latest Report on Jobs reveals that demand for IT professionals topped the poll in February, along with Construction and Engineering roles.

PAYE umbrella contractors earning their daily bread in the IT skills market will also be pleased to hear that temporary workers saw their pay rise at the fastest rate in four months. Economic conditions might still be tough but they appear to be improving, a view shared by REC Chief Executive Kevin Green, who said:

“The labour market is clearly improving as this month’s Report on Jobs shows the strongest performance on permanent placements for nine months. Demand for staff also rose at the fastest pace for four months, so jobseekers should take heart that there are vacancies out there. Slowly, private sector employers are becoming more confident as the gloom, caused by a slowing economy late last year and fears about the eurozone, recedes.”

The temporary jobs market did experience a slight dip in February but appears nonetheless to be in surprisingly good form, even after the full implementation of the Agency Workers Regulations. The feared temporary jobs Armageddon does not appear to be materialising, although it may yet prove to be exerting a moderately dampening effect. Mr Green acknowledged the difficulties, adding that although the temporary jobs market has declined slightly since January, agency work continues to be an important outlet for jobseekers and employers, with over one million temporary workers undertaking assignments in any one week.

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PAYE umbrella contractors specialising in the IT skills market may draw a little cheer from new figures released by specialist recruiter Computer People: according to the firm’s monthly IT Monitor report, permanent IT vacancies rose by 0.06% in January, while IT contracting roles climbed by 0.05%.

IT contractors didn’t fare so well in the finance, banking and insurance sectors, where contract roles fell by 1.39% during January. Permanent vacancies in these sectors rose by 1.4% on the previous month.

IT contractors working in the retail sector, however, saw openings climb by 37.29%, while those in telecoms saw contractor roles rise by 27.03%. Demand for permanent roles was more modest in each of the two sectors, but still increased.

Permanent salaries inched up a little cross-sector, growing by 0.72%. However, contractors saw the healthiest growth in pay rates – 4.12% on average. For contractors with certain specialist skills, the rise was even steeper – over 7%. The most highly remunerated skills lay in permanent business intelligence, .NET/C#, and Oracle. Also hitting a pay increase in excess of 7% were contractors netting Web developer, contract SQL server, IT director and database roles.

Sid Barnes, Computer People’s Executive Director, said: “Many organisations have realised that we might be without a definitive economic outlook for some time, and particularly so for Q1. Therefore, hiring managers are continuing to recruit staff to meet requirements, which fares well for jobseekers in 2012, as it looks set to be a largely candidate led economy for at least the first half of the year.”

The PCG has launched a high profile media campaign in the run up to the March Budget aimed at defending the country’s contractor workforce from unfair criticism.

While it is true that contractors working through umbrella companies have not been caught in the recent media firing line, the journalistic fury aimed at senior civil servants who have fulfilled their roles by working through their own limited companies could well create the inaccurate perception that there is something intrinsically dodgy about contracting.

There has been something of a media feeding frenzy in the aftermath of the Ed Lester affair, with a growing number of civil servants being ‘uncovered’ who have been remunerated through personal service companies. Although the tone of these reports has varied, some have been forthright in immediately alleging that those involved are practising deceit and are actually disguised employees – sloppy reporting, in other words, which could tar all directors of limited companies with the same brush.

In response, the PCG is rolling out a series of adverts (30 in all) across nine major national newspapers, all bearing the banner: “To think big about UK growth, think small.”

PCG’s Managing Director, John Brazier, said of the campaign: “Distrust created by the Ed Lester case has impacted on the hundreds of genuine freelance interim and contractor businesses who are working to benefit companies and organisations in both the public and private sectors.”

“Quite simply we had to speak up using the tools available to us to redress the balance and ensure the hysteria does not cause those in power to make a snap judgement in error that could damage growth for generations to come.”

Demand for experts in IT contracting may climb a few notches in the wake of an independent survey of 200 SMEs in the UK, which found that a disturbing 40% of them suffered a significant data breach.

The report, commissioned by GFI Software, reveals that the breaches occurred as a result of malicious files or booby-trapped links delivered by spam emails. 86% of the IT decision makers polled reported that the volume of spam coming into their companies’ inboxes has either increased or remained the same as last year. Nearly half (46%) rely only on the spam filtering facilities in their antivirus software. 22.5% utilise an anti-spam gateway appliance while 20% rely on dedicated software solutions. Cloud-based solutions were used by only 7.5% of the respondents.

PAYE umbrella contractors with security expertise in the IT skills market could well find themselves drafted in by these firms. According to GFI’s Infrastructure Business Unit General Manager, Phil Bousfield, the spam problem “is not going away.” He went on to say that “the delivery of malicious links and files makes it more dangerous than ever before. Businesses need to respond by taking advantage of all the latest spam-fighting technologies available to them.”

Mr Bousfield explained that the rising volume of spam “is a growing burden on IT administrators looking to find the optimum and most cost-effective approach to email security.” He suggested that the most effective defence, which is increasingly being taken up by larger companies, is to deploy cloud-based anti-spam solutions, which prevent spam from entering the network in the first place.

Further evidence has emerged that the Agency Workers Regulations do not appear to be diminishing the demand for PAYE umbrella contractors and other temporary workers.

The Recruitment and Employment Confederation’s JobsOutlook report for February reveals that there has been a rise in the number of people turning to temporary roles, with many doing so as a stepping-stone to finding permanent employment. However, amongst the ‘temporary total’ are skilled contractors working through umbrella companies, who actively choose such placements because of the work-life benefits.

The REC continues to actively monitor the effects of the AWR and is now working on informing employers of the benefits of hiring tried and tested staff – ie, people who have already worked for them in a temporary position.

The recruitment sector remains resiliently buoyant about the AWR. According to the REC’s Director of Policy and Professional Services, Tom Hadley: “Although the regulations have created significant administrative costs for agencies, the overall feedback from recruiters remains upbeat with regards to the ongoing benefits that temporary and contract work provides for both employers and job-seekers.”

There has been a discernible shift toward shorter contracts, however. This isn’t necessarily bad news; Mr Hadley continued: “The importance of generating an effective stepping-stone back into the jobs market is especially topical in light of the current debate on the Government’s work experience scheme. Short-term placements can often lead to further opportunities, which are certainly something we are seeing in the temporary work market.”

The latest figures are consistent with findings from the previous month’s JobsOutlook report, which revealed that 82% of employers plan to increase their temporary staff over the coming three months.

While the IR35 Forum is playing its last round of hands close to its chest (details still haven’t been published of the last meeting’s deliberations), clues about the direction IR35 reform may take have just emerged from the Office of Tax Simplification.

A major recommendation, which should please many contractors who work through limited companies, is for HMRC to concentrate on high-risk cases where people are using personal service companies to disguise employment. Until now, the Revenue has looked at individual contracts, a method that has inherent absurdities: one contract could be ruled outside IR35 while the next could be ruled inside, while yet another could be ruled outside. The result is a protracted, costly and stressful IR35 investigation that targets hard-working and honest contractors.

The OTS is basically saying ‘out with all that’. Instead, it suggests HMRC use risk profiles to target those who are really practising disguised employment, leaving lifestyle contractors to go about their legitimate business without interference. The latter will be considered to be in business on their own account, even if the odd contract doesn’t tick all the boxes.

Many contractors who habitually rove from placement to placement can breathe easy if the OTS recommendations are implemented (we are likely to know more in the Budget on 21^st March). However, those who remain in the same firm for extended periods may still come under suspicion as a disguised employee under the new system.

John Whiting, the Director of the OTS, said: “Overall, we think that the recommendations put forward today present a common-sense approach that would help to ease the burdens of thousands of the smallest businesses throughout the UK.”

Mildly dispiriting news is in the air for PAYE umbrella contractors working in the IT skills market. A survey of 8,000 umbrella contractors reveals that average pay rates for those specialising in IT have fallen from £33.12 in February 2011 to £32.39 now, amounting to a drop of £1,300 in annual gross income.

According to the poll, pay rates have fallen for two consecutive years, with women faring significantly worse than men: the gap in annual income between male and female IT contractors has grown from £3,225 in 2011 to £4,459 in 2012.

The data, which comes from service provider Parasol, may reflect the slashing of contractor pay rates that took place last year in the banking and finance sector. Rates are expected to pick up again when the economy starts to grow more robustly, however.

Permies may have better prospects for pay rises, however. 59% of IT directors polled by ReThink Recruitment expect pay rates for their IT staff to rise over the next twelve months. Last year, only 47% expected pay increases, although this was at least a step up from the mere 27% anticipating income boosts in 2010.

43% of those polled also expect to increase head counts over the coming year, an increase of 7% on last year’s proportion. ReThink’s Director, Michael Bennett, said:

“This is the first really positive outlook that we have had from IT directors since the credit crunch began.”

“From the feedback that we are getting from many of the UK’s largest employers, the purse strings for their IT departments might finally be loosened.”

2012 may herald the start of lucrative times in the world of IT contracting, with two major new developments underway.

PAYE umbrella techies may be interested to discover that a small but significant stampede is beginning amongst IT professionals in the direction of mobile technology. Specialist IT recruiter CWJobs.co.uk has released a poll showing that almost a fifth of IT specialists (19%) are planning a major overhaul of their skills base to concentrate on mobile computing. Over three quarters (78%) believe that graduates entering the industry would be well advised to get into mobile computing.

A joint survey by the marketing agency Vanson Bourne and software company Antenna Software reveals why: over the next 18 months, UK businesses are likely to double their spend on mobile projects.

CWJobs’ website director, Richard Nott, said: “Who would have guessed five years ago that apps such as Angry Birds would turn into a multimillion pound product? Mobile computing presents huge opportunities for businesses, and in turn, fantastic career opportunities for skilled IT pros.”

There is more encouraging news for those specialising in the IT skills market. The Indian IT giant Tata Consultancy Services, which already employs 6,739 staff in the UK alone, has announced its intention to hire a further 1,500 British IT professionals during 2012. Other big Indian IT firms planning to hire in the UK are Wipro and Infosys.

The move to the UK marks the possible beginnings of a turnaround in IT jobs, many of which were outsourced to India and the Philippines in recent years, at least so far as software development was concerned.

Prepare to get busy, IT contractors.

The latest meeting of the IR35 Forum has now taken place after being postponed from its original date on 18^th January to permit extra time for additional work by HMRC on reform.

While PAYE umbrella contractors have little to be concerned about over the policing of IR35, many contractors working through limited companies are exceptionally wary about HMRC’s previous management of the regulations. The Forum was created in the wake of last year’s Budget after the Chancellor decided to retain the controversial rules but improve the administration by the Revenue.

In addition to officials from the HMRC, the Forum also includes representatives from the contracting and recruiting world, such as the PCG and REC, as well as employment status and accountancy boffins. So far, the Forum has agreed that HMRC should target its policing of IR35 on high risk cases rather than adopt a generalised suspicion that limited company contractors are up to no good. Dedicated IR35 teams are scheduled to be set up by the Revenue to ensure this and to reduce the protracted periods over which investigations can drag on.

The REC’s Gillian Econopouly, who attended the latest meeting, said: “The work of the IR35 Forum is ongoing, and the REC will continue to actively represent the views of the recruitment industry in the run up to the 6^th April deadline when the Government will formally adopt changes to how the IR35 regime is administered.”

The minutes of the last meeting have not yet been published, but the signs appear to be that the full package of proposals for reform will be in the bag by the April deadline. Watch this space.

The REC’s latest JobsOutlook – its monthly survey of 600 employers – strikes an upbeat note for jobbing PAYE umbrella contractors. Despite the continued precariousness of the economy, employers remained confident last month. Agency staff were more in demand than this time last year, even after the implementation of the Agency Workers Regulations.

The number of employers planning to hire more permanent staff in the coming three months climbed three points to 65%. Nearly a third (30%) say they will maintain current permanent staffing levels. A mere 5% intend to cut staff.

Although it is still too early to gauge the full impact of the AWR, contractors working through umbrella companies or personal service companies are solidly in demand. Over the next three months, 82% of employers say they will increase their temporary personnel. In the longer term hiring intentions are even more robust, with 84% planning to increase or maintain their agency staff.

Anyone hoping to find contractor roles or permanent posts in the public sector may have less of a struggle than they might have expected – more public sector employers now believe that budgetary cuts will have a less harmful effect than previously. 38% believe they will have little effect on their business while 32% believe they will have no effect at all. Only 28% think the cuts seriously harmful.

Roger Tweedy, Director of Research at the REC, noted with approval that the employer confidence barometer had risen to 24 – a substantial rise on than the low point of 19 recorded in September.