Crystal Umbrella

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.

The PCG (formerly known as the Professional Contractors Group) has notched up another victory against HMRC in its relentless fight against the misapplication of IR35 rules to legitimate contractors working through their own limited companies.

Phil Winfield, the Director of Primary Path Ltd and a member of PCG, emerged triumphant after the first tier tax tribunal he attended ruled that he had been working as an independent and self-employed contractor for the company GSK, not as an employee, as HMRC contended.  He had endured eight years of uncertainty following HMRC’s decision to investigate him in 2003.

In response to the ruling, PCG’s Director, John Brazier, said, “We are still fighting IR35 on all fronts to defend our members….Frankly, clarity for Phil was long overdue, but we are delighted he can finally get on with developing his genuine freelance business”.

Mr Winfield spoke of the effects of the investigation after the tribunal’s ruling.  It had led to considerable emotional and financial strain, he said, with the shadow of stigma hanging over him and his business over many years.  Had he not received help from Accountax Consulting through his membership of PCG, he would have faced costs exceeding £50,000, largely because the investigation took so long.  “In today’s age of accountability, the amount of time HMRC took to argue their case means that the figure this has cost the taxpayer must be enormous, when compared with the amount they were fighting for,” he added.

Winfield’s victory is the third one chalked up by PCG and Accountax in recent months.

PAYE umbrella freelancers specialising in IT contracting look set for a bumper year as demand for their skills soars and IT spending rises.  That is according to two new reports – one from the Association of Professional Staffing Companies (APSCo) and the other from industry analyst In-Stat.

Commenting on the APSCo research, the organisation’s Chief Executive Ann Swain said that in certain areas of the IT industry, shortages in the IT skills market were becoming widespread.  The deficit has led to burgeoning demand for highly skilled IT specialists and a surge in pay rates – the essential ingredients of a bidding war.

Candidates with highly sought-after niche skills are receiving multiple job offers; according to Ms Swain, “double digit pay increases are now commonplace.”

IT spending had dropped during the recession, Swain observed, but is now seen as the key to competitive advantage.  “IT directors are increasingly keen to push the button on projects which will deliver significant productivity gains,” she added.

Her comments are borne out by In-Stat’s findings, which forecasts that enterprises will increase spending on IT services by six per cent during 2011, despite the still-uncertain conditions in the global economy.  The report identifies wireline data, VoIP, and cloud computing as the areas likely to expand.

In-Stat analyst Greg Potter said positive growth will be seen in all areas of IT, “with education and healthcare and social services leading the surge with growth of ten per cent and nine per cent respectively”.  The only area likely to see a small decline, he said, will be wireline voice, which will probably see spending fall by half a per cent.

Umbrella companies with IT professionals on their books, it seems, are about to get very, very busy.

PAYE umbrella contractors on the lookout for new work placements have been dealt a mixture of good and not-so-good news by the latest CBI/Harvey Nash Employment Trends Survey.

CBI Director-General John Cridland warns that wage growth is very likely to remain flat over the next six months but on a brighter note, nearly one-third (29 per cent) of the UK’s private sector firms will be on a recruitment drive.  Umbrella companies, in other words, should see their contractors in regular work, although pay rates will hardly have them dancing on the streets.

Public sector workers fare especially badly according to the report: pay freezes in general have risen from 14 per cent to 23 per cent since October 2010 but in the public sector, they stand at 80 per cent.  Public sector workers facing the chop in the wake of the government’s spending austerities might derive a few crumbs of comfort from the news that recruitment prospects appear to be strengthening in the private sector, especially for highly skilled professional staff.  Skilled contractors are also likely to benefit.

Mr Cridland continued: ” The pay and recruitment freezes that were commonplace in the private sector during the depths of the recession have now migrated to the public sector.  However, we remain confident that private sector growth can more than compensate for job losses in the public sector. ”

Pay rates have been hit by the continuing fragility of the economy, with 31 per cent of the firms polled saying they will be planning increases below the RPI.  Only four per cent of respondents said they would be planning above-inflation-rewards.  20 per cent plan to target higher awards on some staff only, while 17 per cent will make awards in line with the RPI.

A mixed picture of the prospects for the UK’s workforce has emerged from a new study from the Chartered Institute of Personnel and Development (CIPD), although contractors working through umbrella companies or limited companies may find some aspects encouraging.

The “ Resourcing and Talent Planning Annual Survey, ” produced in collaboration between the CIPD and Hays Recruitment, reveals that small companies are struggling to find workers with the relevant skills even in a context of high unemployment, with numerous applicants for each post.  75 per cent of the survey’s 636 respondents reported that they had experienced difficulty in finding appropriately skilled candidates for their advertised posts in the last year, compared to 68 per cent in 2010.

However, highly skilled PAYE umbrella contractors appear to be increasingly valued by small firms, with 29 per cent of those polled declaring that they saw such workers as a core component of talent planning.  Moreover, the survey reveals that 62 per cent of employers anticipate that demand for contractors and other temporary workers is about to rise.

Continuing economic uncertainty appears to have had a predictable impact on employers, however, with a majority maintaining that they remain reluctant to appoint new permanent staff in the foreseeable future.

The CIPD survey virtually coincides with data from the Office for National Statistics that showed that unemployment fell in the first quarter of 2011 to 2.43 million.

Contractors working through umbrella companies or limited companies may wish to take heed of a recent warning from HMRC- beware a new phishing scam.  Timed to coincide with the run-up up to the deadline for tax credits renewals, the fake emails inform recipients that they are entitled to a tax rebate.  By simply following a click-through link, respondents are told that they can claim their refunds.

However, beware – the HMRC website you will arrive at is a cloned replica.  If you comply with the inevitable requests for your debit or credit card details once you are there, you will have just handed your information over to fraudsters – who then try to siphon as much money as they can from your account.  Victims can find their details sold on to other cyber-crime gangs as well as having their bank accounts emptied.

The first tax credits renewal forms were sent out by HMRC in April.  Since then, customers have reported over 46,000 phishing emails.  Although the Revenue has so far managed to close down more than 150 fraudulent websites, the organisation’s Director of HMRC Online and Digital, Joan Wood, has clarified that the organisation only ever contacts customers about any due tax rebates by letter.  She added, “We don’t use telephone calls, emails, or external companies in these circumstances.  If anyone receives an email claiming to be from HMRC, please send it to phishing@hmrc.gsi.gov.uk before deleting it permanently.”

The email frequently begins with words such as “we have reviewed your tax return and our calculations of your last year’s accounts a tax refund of X is due.” This is one gift-horse whose mouth you should definitely look into very carefully.

PAYE umbrella contractors may do well to turn to small and medium sized enterprises in the search for new work placements in the coming months, especially if they specialise in IT contracting.  That is the conclusion to be drawn from the latest Manpower Employment Survey Outlook, at least, which reveals that the UK’s small firms are driving job creation well ahead of other employers.

The survey gathered responses from more than 2,100 employers across the UK, all of whom were asked about their recruitment intentions for the forthcoming quarter.  Overall, the trend is slightly upwards: the seasonally adjusted net employment outlook for Q3 (July to September) stand at +3 per cent.  But when looked at separately, SMEs declared hiring intentions of almost three times this level, with an outlook of +8 per cent.

UK Managing Director of Manpower, Mark Cahill, said: “SMEs were amongst the first to shed jobs during the recession, but we’re now seeing them build their workforce again and becoming an increasingly important source of job creation in the UK”.

He added, “It seems when it comes to job vacancies, small is beautiful.  Candidates sometimes assume that bigger is better when it comes to employers, but these statistics clearly point to the opposite.” He noted that demand for workers with expertise in the IT skills market in particular was soaring.

The Manpower Survey is in line with figures released this week by the Office for National Statistics, which showed that manufacturing output in April was 1.3 per cent higher than 12 months previously.

It may not quite be time to pop any champagne corks, but at least a return to economic growth of sorts appears to be underway.

The culture of security clearance has gathered a great deal of momentum in the UK, even though many commentators believe it to have grown needlessly excessive, with far too many people, including PAYE umbrella contractors, having to submit to lengthy and expensive clearance procedures for very little rational purpose.  The latest voice to speak out against this viral over-emphasis on security is the Chair of the REC’s Technology Division, Jeff Brooks.

The REC maintains that too many job adverts demand that contractors who already have pre-existing security clearance should submit to new clearance procedures before they take up their new roles.  To counter this trend, the organisation has called on all concerned to collaborate in devising more targeted security procedures and overcome what has turned into an employment barrier.

Commenting in the predicament, Mr Brooks said that everyone was in agreement that job adverts requiring pre-existing security clearance should be avoided.  He went on: “Including as wide a pool of candidates as possible is best for the client, best for the recruiter and of course best for candidates seeking work.  This is becoming more urgent as the ratio of qualified candidates to vacancies is beginning to tighten.”

Contractors working through either umbrella companies or limited companies generally pride themselves on their flexibility – they can move in quickly to take up necessary work in an organisation and then move on.  However, continually having to submit to security clearances inevitably slows things down.

Mr Brookes was clear that clients as well as recruiters should work to make the system more efficient.  He recommended clients plan their skills needs in well advance and avoid demanding security-cleared IT contractors to start work in two weeks’ time.