Crystal Umbrella

Hays chief executive, Alistair Cox, has been speaking about the fears facing umbrella contractors currently working in the public sector. He has acknowledged that the majority of these contractors are worried about losing work due to cuts in funding and jobs across the sector.

While the government is looking to the private sector to provide the job opportunities for those on whom the axe will fall, it is unlikely the private sector will actually be able to meet the demand of the 750,000 public sector workers who are expected to lose their jobs.

Mr Cox has actually suggested that the government should consider the abolition of employers’ NICs in a bid to boost economic growth within the public sector. Such economic growth should, in turn, boost employment opportunities. Cox believes that these measures would be the next logical step from the relief that has already been given to small businesses by the coalition government. At present, small business start-ups can take advantage of a 12 month NIC holiday for the first 10 people they employ. However, it is rather unlikely that the government would look to increase this benefit in the name of boosting the private sector’s finances since it would have a detrimental effect on the public purse which cannot afford to be hit any harder.

On a positive note, recruitment opportunities have been increasing although it would seem that the job opportunities are becoming available through individuals moving jobs rather than new jobs being created.

UK contractors working in the IT industry, particularly those working as limited companies or sole traders have been boosted by a new report from an advice website.

The report claims that a wholesale changed in attitude means a larger amount of businesses do not know view IT as an area they can cut back on. This is a drastic sea change from previous economic downturns where IT budgets were among the biggest cutbacks for many organisations.

Of course the importance of IT is growing all the time. There are huge numbers of contractors working in the IT industry, and that number is expected to grow significantly in the years ahead. Whilst many businesses and organisations will have to make IT cutbacks, the fact that they will only do if absolutely necessary is a major boost to contractors in the industry.

“This time round IT was seen as both a cost-cutting enabler and as too crucial to the business,” said Gerry McLaughlin, spokesman for Itcontractor.com.

“In the new information age, access to business information is seen as the biggest differentiator and companies didn’t want to come out of recession a couple of years behind their rivals in terms of the software components of their products and services.”

Contractors out of work or looking to retrain would do well to consider the benefits of the IT industry. Whatever the effects of the upcoming spending review, the IT sector should continue to grow in the next decade.

There is a widely held opinion that opportunities for contractors are rapidly dwindling as a result of the extensive public sector spending cuts. However, there could actually be some exciting times ahead for skilled IT contractors.

FTEN are an American technological company who are responsible for innovating a new system, which will be rolled out across the financial services sector. This, in turn, will create an abundance of job opportunities for skilled contractors who will be required to set the new system up. FTEN have just had a patent granted on their new technology, which is ground breaking within the sector. It is believed that this system, which analyses systemic risk-management in real time, will actually revolutionise financial services.

The question appears to be whether the contracting market will actually be able to meet the demand because it is expected that there will be no shortage of opportunities once this project gets underway. All market-based firms will require updates to their existing technology to allow the installation of the new technology. Eventually the public sector will have to update their systems in order not to be left behind. This will create further opportunities.

This is not just a possibility. This new technology is currently being purchased by the banking sector. IT contractors are sure to benefit from these developments and should look to financial services for these new opportunities.

New research has been conducted by business advisory group IMS Executive Ltd amongst 2,000 interim executives to determine the manner in which they, including many of those who work through umbrella companies, would cut their daily rates of pay.

The data from this research has shown that most individuals have actually already cut their rates as low as they possibly can. However, for those executives who are currently charging from £500-£900 just over half said that they would consider reducing their rates between 10% and 24%. Lower paid contractors said that if it was a choice between cutting rates or being unable to continue working, they would cut their rates by up to 40%. Interestingly, the most highly skilled and highly paid interim executives were actually opposed to any cuts in their pay rates. These specialised individuals pointed to their change management experience; arguing that their track record had resulted in millions of pounds saved for the government and therefore any cuts in rates would be ’short-sighted’.

IMS Sales and Marketing Director, Tony Shearing, believes that the hiring of freelance staff is an economically viable option for businesses as they have access to these skilled workers without being responsible for paying out benefits applicable to permanent employees such as NICs and pension contributions.

He believes that contractors should be considered value for money as long as they have the skills and experience to deliver the results the client is looking for. It should not be about how little that contractor is willing to do the job for.

The Financial Services Authority have confirmed the end of the self-cert mortgage, confirming that self-employed individuals will be subject to an “affordability test” prior to being accepted for a mortgage.

The FSA said that everyone must be able to prove their ability to repay a mortgage. They conceded that those contractors and freelancers whose income can be irregular may “have to wait longer before applying for a mortgage.” They also confirmed that it will be the individual’s responsibility to “gather a track record of [their] income”. It is likely that each individual will be expected to prove their income over the previous three years.

The FSA pointed to the level of arrears amongst self-employed individuals and freelancers as the reason for the end of these non-income evidenced mortgages. The FSA director for the mortgage market, Lesley Titcomb: “While it is clear the mortgage market has worked well for many, we need to build a strong new framework to protect mortgage customers and to ensure that the problems we have seen in the past do not happen again, particularly as the mortgage market recovers.”

The new proposals are currently under consultation, with this period due to end in November. Other changes include self-employed individuals and contractors being restricted in their borrowing if they have a poor credit rating.

The FSA concluded: “While non-income verified mortgages were originally aimed at niche audiences, such as the self-employed or the lowest risk applicants, they gradually became more widely used…stringent criteria may have originally been applied to such applications, for example in terms of loan-to-values, these criteria were relaxed over time.”

Contractors working in the public sector are already starting to feel the squeeze as spending cuts get underway. IT firms who supply the public sector have been advised they will need to cut their fees by 20%. This request was made at a meeting of all nineteen IT suppliers to the government. At present these firms charge the government in the region of £16 billion.

Francis Maude, cabinet officer minister, confirmed that this “marks the start of the process to renegotiate key government contracts” regarding “everything” that these businesses “do for the government” in a bid to cut costs.

The suppliers involve include such technology giants as BT, IBM, Fujitsu, HP and Serco. According to IT analysts TechMarketView the government will probably choose to curtail the extent or length of contracts rather than seek to cancel them altogether. The government’s CIO, John Suffolk, will be the man responsible for the contract renegotiations.

Mr Maude commented: “Given the really difficult economic climate we now face, we have to do everything we can to deliver better value for money for taxpayers and that involves taking some tough decisions. I am laying down the challenge to major government suppliers to ask them what they can do to take costs out of contracts. Some of this will come out of margins, but we will also invite ideas on how we can structure things differently to reduce complexity and cost.”

The coalition government have stated their belief that the private sector holds the key to tackling unemployment and strengthening the UK economy, particularly in light of the public sector funding cuts.

Now, an expert has claimed that many companies are choosing not to utilise the talents of the freelancing sector as part of their firm. The Chartered Management Institute’s Mike Petrook said that businesses should be making sure they have access to individuals with as many qualifications and as much experience as possible at a time when there is a skills shortage in the UK.

He also said that companies need to bear in mind that it is the quality of the end result which is most important, not whether the individuals work for the company and clock up more hours as permanent members of staff.

He added: “Are they meeting the objectives? Are they helping the organisation? That’s what really counts. Flexibility is key.”

However, despite Mr Petrook claiming that flexible workers are key, Hays have just completed research which suggests that UK businesses are not taking advantage of the IT skills which exist amongst the freelancing sector. The research attributes this to business heads believing that IT contractors are only used to avoid hiring permanent staff.

Hays company director, Charles Logan commented: “As transformation takes effect and the line between the two sectors continues to blur, a flexible workforce will be a key component of any successful organisation.”

The latest ‘Report on Jobs’ from the Bank of Scotland confirms that opportunities for contractors based in Scotland are continuing to rise, although the speed at which the sector is strengthening has slowed slightly as 2010 has progressed.

The Report focuses on May and details that permanent and temporary appointments increased during this time. There was also an increase in the number of jobs advertised during the month of may signalling that confidence is returning to employers. However, rates of pay rose at a slower rate and there were more candidates applying for vacant positions.

The strengthening of employment opportunities north of the border was not pertinent to one particular sector, as appointments rose in Engineering and Construction, Professional and Executive positions although the It and Computing sectors lead the way.

Bank of Scotland Chief Economist, Donald MacRae, stated: “This month’s increase in appointments in both permanent and temporary jobs, as well as the rise in the number of vacancies available, is a sign that the Scottish labour market is in recovery. This recovery did lose momentum in May however, with employment and pay rising at weaker rates. While the headline index reading remains solid, it is well below the figure recorded for the UK as a whole. We can expect a continuing but muted recovery from recession, with some time before unemployment starts to fall.”

Technical giant Hewlett Packard have announced 934 job cuts across their UK bases. The company currently employs 16,500. The union Unite, which condemned the news, has predicted a further 1000 job losses over the next 9 months.

Unite national officer for IT and communications, Peter Skyte, commented: “This is a further cull by Hewlett Packard of its skilled and experienced UK workforce, and follows nearly 4,000 jobs being cut over the past few years.”

Speaking to Contractor UK, a spokesperson for Hewlett Packard commented: “Hewlett Packard is in consultation with the appropriate representative bodies within the UK regarding potential workforce changes that were first discussed with the Hewlett Packard European Works Council in November 2009 and have been part of an ongoing consultation process since then.

The spokesperson continued: “The changes Hewlett Packard is proposing are part of the company’s ongoing review of its business that will ensure Hewlett Packard continues to grow in a globally competitive marketplace and deliver world class products and services to its customers.”

It seems that while this is bad news for permanent staff, it is positive for skilled IT contractors as more and more technical firms seem to be favouring the benefits of a temporary workforce.

This was a view backed up by the director of Arrows Group, Adrian Treacy, who told Contractor UK: “Many technology companies choose to retain temps and contractors over permanent staff so that they have a more flexible workforce. There are peaks and troughs in the IT sector – when developing and launching a new product, organisations will need a large workforce to service this level of activity, but then there will be periods of downtime where far less people are required. Temporary staff can be a great solution – companies have the input of skills when and where they need them but do not have to pay salaries, pensions and other benefits when business is quiet.

Mr Treacy concluded: “Recruiting contractors is also the ideal way to get access to very niche skills, which are impossible to teach a permanent employee in a short period of time – there are many freelance IT professionals whose careers are focused on plugging their niche skill set into a series of short-term projects and who can therefore provide invaluable input.”

IT contractors in the UK could be set to benefit from the inefficiency of UK firms. It has been claimed that many British companies are struggling with their IT provision which could create opportunities for skilled IT contractors.

This has been the suggestion of Centrix Software, an IT optimisation firm. They have stated that managers in IT services are having particular difficulty with determining the appropriate use for applications and technical devices within their departments. It seems such department heads are requiring the expertise and skills base which is commonplace within the technical freelancing community.

The firm conducted a survey amongst such businesses. Just over half of the respondents said that they would be able to figure these issues out themselves “with some difficulty” while a further 22 per cent stated that they would find such a task “extremely difficult” or “impossible”.

Centrix believes this is evidence that many businesses are not protecting their IT investments due to an inability to use the software and associated devices to their full advantage. This could actually be costly to these businesses.

This is certainly the view of Lisa Hammond, Centrix chief executive officer. She stated: “Many businesses harbour unnecessary costs due to not taking the most efficient path to delivering IT.”

Ms Hammond continued: “By having the ability to track and monitor their application usage, immediate cost savings could be made without affecting performance.”