Crystal Umbrella

Contractors working for umbrella companies or through their own limited companies might do well to take heed of some pertinent observations recently proffered by the National Computing Centre’s Head of Marketing, Michael Dean. Although he was addressing those in the IT skills market particularly, his remarks have direct relevance to most freelancers on the contractor payroll, whatever their specialism may be.

Whilst of course it’s essential to be able to demonstrate that one has the requisite formal qualifications to carry out a role, according to Mr Dean this may not be enough in many cases. Specialist expertise is undoubtedly much sought after, but in these exceptionally competitive times, when the private sector is faced with a glut of refugees from the public sector due to the government’s deficit reduction measures, “necessary” isn’t always sufficient.

Michael Dean was underlining the pivotal part quietly played by other characteristics – those aptitudes often regarded as “personality traits” and sometimes referred to as “soft-skills,” such as the ability to get along amiably with other people, the capacity for leadership, self-motivation and project-management aptitudes. Competence-based qualifications may tell prospective employers about an applicant’s formal skills, but will say very little about these extra abilities which they undoubtedly consider to be part of the recruitment picture.

Should two candidates with identical or very similar formal qualifications be competing for the same job, the likelihood is that the one who demonstrates the more advanced “personality skills” will secure the post. None of this is to suggest that formal qualifications are unimportant – the reverse scenario is most unlikely to occur. But amicability, initiative and leadership certainly don’t go unnoticed in today’s job market.

Contractors in the IT skills market may endorse the views of a leading security expert, which suggests that IT freelancers on the contractor payroll may need to assist the companies they’re placed with to become more aware of fundamental security issues.

According to Robert Cheyne, an expert with SafeLight Security Advisors, not enough end users are being adequately engaged by companies to take an interest in protecting their firm’s data. In an interview with SearchSecurity.com, Mr Cheyne said that it’s fairly typical for employees to assume that data security is already being taken care of by someone at a higher level, whereas the truth is that employees are a “major part of the security process.”

The issue, which clearly has relevance for the UK workforce, came to light in Boston, Massachusetts, when an employee of a healthcare company emailed sensitive bank details to a mortgage broker. The worker concerned mistakenly believed that the connection was secure when in fact it wasn’t.

One way forward advocated by another security commentator, Winn Scwartau, is for the industry to come up with solutions that have implicit security models integrated into them. This approach would remove the onus from individuals and move data security to an automatic, behind-the-scenes level.

This news comes in the wake of the first two monetary penalties issued by the UK’s Information Commissioner’s Office following major breaches of the Data Protection Act.

PAYE Umbrella contractors may be cheered by new findings from the Recruitment and Employment Confederation (REC) and KPMG. Numerous reports have been emerging in recent weeks suggesting that the Office for Budget Responsibility’s forecast of growth next year is over-optimistic at 2.2 per cent. Both the Institute of Directors and the British Chambers of Commerce have predicted growth figures substantially below this (1.2 per cent and 1.9 per cent respectively).

Any data that appears to contradict these more pessimistic extrapolations would clearly be welcome. Whilst the new Report on Jobs issued by REC and KPMG doesn’t quite amount to a forecast, it does chronicle an encouraging trend. The UK labour market revived noticeably in November this year, the report shows, after slowing down during the previous two months. Both temporary billings and permanent placements rose at the fastest rate in three months during November, and pay rates for both temporary and permanent staff also increased.

The one negative aspect of the report lies in the relative surfeit of applicants to fill the available job openings, a trend which suggests that contractors working for either umbrella companies or limited companies will inevitably face keen competition for job opportunities. Commenting on the report, Kevin Green, the REC’s Chief Executive, noted that the UK job market continues to be in a “fragile” state, especially in the wake of the public spending austerities, although confidence appears to be returning amongst employers in the private sector. If so, this is a trend that will be welcomed by many of the 2.45 million people (7.7 per cent of the adult population) who are currently looking for work.

A particular field in the UK’s IT skills market is enjoying a powerful surge in demand and appreciably higher rates of pay for their services. That’s according to new research just published by the recruitment firm, ReThink, which should give IT professionals working through umbrella companies or their own Limited Companies a welcome shot in the arm.

Professionals in the IT contracting community who work on Solvency II projects have seen their rates of pay rise by 50 per cent, the survey reveals. In hard cash terms, this translates to between £600 and £900 per day.

One of the primary influences driving this surge in demand and remuneration, ReThink believes, is the push amongst insurance companies to prepare for Solvency II requirements before December 2011, when the rules will be enforced.

The firm said that both demand and wages have been rising as insurance firms clamour to prepare for new “Solvency II” requirements (regulations governing the insurance industry throughout the EU) before the rules are enforced in December next year.

Commenting on the research findings, ReThink’s spokesman Guy Stubbing said that the dash to comply with Solvency II has generated a huge demand for appropriately skilled IT professionals. The demand is so great, in fact, that ReThink is placing part-qualified actuaries – so-called “hybrid” IT workers – who can demonstrate skills in sought-after areas like reporting systems and skills modelling.

Mr Stubbing revealed that a consequence of the unprecedented demand for these professionals is a bidding war – IT contractors with the requisite skills are finding that they’re receiving multiple placement offers simultaneously.

Freelancers on the contractor payroll of umbrella companies or working through their own Limited Companies may be interested in a new study by professional services giant PricewaterhouseCoopers (PwC). According to the research, twice as many firms are planning to expand their workforce in 2011 compared to 2009.

In total, this represents around 28 per cent of UK firms, although the study also found that 15 per cent of those surveyed were planning “significant increases.” Recruitment is expected to be especially vigorous in manufacturing, technology and service industries.

PwC’s head of PR, Michael Rendell, hailed the accountancy firm’s findings as “encouraging news for the job market.” The headcount increases suggest that, in the wake of the austerities announced in the government’s Comprehensive Spending Review, many refugees from the public sector may be accommodated in the private sector in the event of redundancy.

The UK recruitment agency Jobsite also believes that the country’s jobs market may be improving. It noted a rise in the number of jobs vacancies advertised across a broad range of industries with a variety of different roles becoming available.

The latest news isn’t all positive, however. The Confederation of British Industry (CBI) has also just released figures which show that, during the November quarter, the UK’s huge service sector remained flat, with volume standing still at +3 per cent and value remaining stubbornly at -3 per cent. Whilst professional and business services remained steady, consumer services took a surprise tumble over the last few months. Reductions in consumer discretionary spending may be partly to blame, although the CBI also cited rising costs, falling prices and flat volumes.

As we might expect in economically uncertain times, conflicting reports about the future prospects of UK plc will abound. Just as the Institute of Directors publishes its report suggesting that economic growth for next year will be much lower than the government’s predicted 2.1 per cent (the IoD believes it will be closer to 1.2 per cent), another leading industry body, the Recruitment and Employment Confederation (REC), suggests that the outlook for the recruitment industry in the coming year looks positive.

PAYE umbrella contractors in the field of IT especially can take heart from the comments of REC spokesman, Jeff Brooks, who is Chair of the organisation’s technology sector group. According to Mr Brooks, a range of sectors including pharmaceutical, science, technology, engineering and financial, are all reporting that they are now experiencing positive growth. This represents a significant change from this time last year, when each of these sectors appeared to be either shrinking or, at best, standing still.

The skills of the IT contracting community in particular appear to be in demand. According to Mr Brooks, umbrella companies with skilled IT professionals on board are in an “excellent position” to provide customised information, skilled expertise and support to specialist recruiters across a variety of different markets. He added that for 2011, priorities for the REC will include driving sector-specific lobbying and raising client awareness.

With temperatures set to plummet again this week across the UK, Mr Brooks’ comments may bring a little warmth and cheer to those in the IT skills market at least.

Freelancers in the UK’s IT contracting community may well want to heed advice recently given by a leading legal expert. Solicitor Gary Cousins, who co-founded the law firm Cousins Business Law, has been advising IT contractors on the rules governing the copyright of software design.

The rules are relatively straightforward: if an IT freelancer is the author of a software design, they will in most cases also own the copyright – unless, that is, they were acting officially in the role of employee. In order to avoid subsequent disputes, Mr Cousins urges contractors to look carefully at their contracts to be clear about whether or not they have “assigned” the copyright for their designs to the consultancy or organisation they have been working for.

Writing for ContractorUK, Mr Cousins explained that assignment of copyright in general must be in writing in order to be legally binding. Sometimes, however, in the event of a dispute, courts will decide that, where work has been produced to order, there was an “implied” assignment. Courts will take into consideration the history of the contractor’s involvement with a consultancy, the purpose and nature of the designs and any written instructions before reaching their decision.

Mr Cousin’s remarks came in response to a question from a contractor who had been asked to remove his online portfolio. The consultancy he had previously worked for had threatened legal action as they insisted his portfolio contained designs belonging to them, even though there was no written contract or Non-disclosure agreement involved.

Like everyone else, freelancers working for umbrella companies are approaching 2011 with a mixture of cautious optimism and trepidation. It’s not clear yet precisely how the government’s spending review will impact on the UK economy and many on the contractor payroll are anxious about future job prospects.

A trend noticed by IT recruitment specialists Prime Sourcing suggests that some organisations are planning to reduce their use of contractors in the New Year. Whilst this is unlikely to result in a jobs carnage, it may well mean that conditions will be steady as s opposed to spectacular, according to industry news portal Contractor UK.

Prime Sourcing’s Chairman, Jeff Brooks, believes that despite this trend, plenty of opportunities will continue to exist in a number of areas. He noted that consultancy companies, systems software suppliers and the banking sector are all busily recruiting IT contractors.

Even though London and the south-east continue to be the areas of strongest demand, Mr Brooks insists that other centres such as Birmingham and Manchester will also provide good opportunities in 2011. Some firms, however, are undoubtedly looking to find ways of reducing their contractor input, with several considering cutbacks of up to 50 per cent.

It simply isn’t possible at this stage to make hard and fast predictions about what the New Year will bring. Contractors could become casualties of the public spending cuts, but could equally well become beneficiaries, as private sector companies and local authorities alike turn to the flexible working model in preference to permanent appointments. As 2010 comes to a close, the jury’s still out.

A little seasonal cheer has appeared for freelancers working for either umbrella companies or limited companies. Figures from the major recruitment firm, Reed, suggest that vacancies reached the highest point this year last month. The latest Reed Job Index shows that demand for new staff reached an annual peak in November, with job opportunities rising by four percentage points over October’s figure.

According to the Managing Director of Reed.co.uk, Martin Warnes, job demand as recorded in the latest statistics is now 11 per cent higher than when the survey first began, an encouraging sign that the demand for jobs is continuing to grow. Of especial significance in the light of recent public expenditure cutbacks is that demand for new workers in the private sector appears to be accelerating. According to Mr Warnes, a wide range of areas are actively recruiting, including engineering and scientific sectors as well as banking and financial services.

Reed’s figures emerge at the same time as the results of a survey of IT staffing experts conducted by the specialist recruiter, Outsource UK. Those with specialist knowledge in the IT skills market will not necessarily be jumping for joy at Outsource UK’s forecast, but neither will they be driven into despondency: strains in this market, caused largely as a result of public sector economies, are likely to spill over into the first quarter of 2011. But, the survey suggests, so will the strengths – there is evidence of continued, steady demand for expert knowledge of Java and C#, especially in the south of the country. Web-based development within the .Net space continues to be strong, and the verdict is for a “steady but not spectacular” market in 2011.

Contractors have been vocal for many years now regarding the IR35 tax rule and their wish for its abolition. Now the Institute of Directors have joined the campaign for the intermediaries legislation to be repealed.

Handing a paper to the Office for Tax Simplification (OTS), the IoD referred to IR35 as “a serious problem”. They pointed to investigations which find contractors to be inside IR35 and the subsequent effect on organisations who have hired them, when the taxman comes knocking for PAYE and NICs. It is the belief of the IoD that tIR35 should be replaced with a specific test for contractors based on their working practices. They also believe an initial screening test should be introduced.

Speaking to Contractor UK, Richard Baron, head of tax at IoD commented:
“We want to take as many businesses as possible out of the scope of the replacement for IR35 in order to minimise the hassle for businesses. If a large number of businesses could take one look at an initial screening test and know straight away that they do not need to worry [about the contractor’s IR35 status], that would be very helpful.”

Speaking about the introduction of a test for contractors, the group told OTS: “The test would however need to be one that would allow most contractors to be confident of their likely status for a tax year, or for an engagement, while the year was in progress or before starting the engagement. Otherwise they might not put enough money by to cover tax and national insurance (NI) liabilities.”

IoD concluded their submission by stating: “The managed service companies’ legislation, which was necessitated by the impracticality of applying IR35 on any large scale, has tackled the bulk incorporation of whole workforces. There is a case for some replacement for IR35… [but the legislation has] has turned out to be a bad solution to a problem that has shrunk”.