Crystal Umbrella

It has been revealed in a new survey that up to three quarters of small business owners find it difficult to go on holiday and leave their work concerns at home. With many freelancers providing ongoing services for a range of companies, sole contractors also feel concerned, finding that they are unable to relax whilst away. Whilst umbrella companies offer the ideal support for contractors, the uncertainty of long-term work keeps many individuals from unwinding fully.

The news comes after Intuit, the accountancy software provider, revealed results of its latest survey. 72% of small business owners worked whilst away, with a seventh admitting they spent less time relaxing than they did working. In addition, 22% of those questioned admitted that their first day back in the office left them more stressed than they had been before going on their break.

With many of these concerns also relating to the freelance market, Inuit revealed that ‘work-cations’ were increasing in prevalence, with individuals going on holiday but taking mobile devices and laptops with them so that they could work whilst away. Managing Director of Intuit UK, Pernille Bruun-Jensen, said “Everybody needs to take time off now and then but our findings show that small business owners never switch off, even when they could really do with switching off. Rather than not taking a break at all, many of them are choosing to take their business away on holiday with them.” With umbrella companies seeing a rising number of people in the freelance field, more people than ever are expected to be indulging in work whilst away.

IT contracting in the financial services sector continues to have decidedly healthy prospects, new research suggests.

The study from the contractor service provider Giant Group suggests that insurance firms and banks are boosting their IT expenditure, a development that hasn’t gone unnoticed by many PAYE umbrella contractors in the IT skills market. A third of IT contractors believe that it will be the financial services sector where most IT jobs will be found in the coming year – a significant rise from the same time last year, when only 8% of those polled felt that way.

The number of contractors anticipating that the public sector will produce the most jobs has virtually halved, plunging from last year’s 17% to today’s 9%. In 2008, the proportion was a positively buoyant 30% but the government’s austerity measures have since taken the wind out of the public sector’s sails. With public sector opportunities evaporating, the finance sector is becoming considerably more important to specialists in IT contracting.

Experience and skills in cloud computing will be especially in demand, according to the Giant Group’s Managing Director, Matthew Brown, who believes the evidence now suggests that banks are “ramping up spending again” after the recession, during which they pulled out of many IT projects.

In addition to efforts to improve productivity through cloud computing, banks also have to deal with new regulations aimed at making them more transparent. Brown believes this, too, is driving demand for IT contractors.

The research heralds a welcome change in fortune for IT contractors, who suffered acutely during the depths of the financial meltdown.

Two new forecasts offer opposing prospects for umbrella companies in the coming year.

PAYE umbrella contractors hunting for new placements may be heartened by the latest forecast from the CBI. It predicts that, while growth will remain sluggish throughout 2011, GDP will rise modestly in 2012. However, a study by the insurance firm Aviva suggests that 10% of small firms fear having to close unless trading conditions improve.

The figures come at a time when consumer spending appears to be faltering and most measures of business confidence indicate a decline. Even so, the CBI anticipates a 1.3% expansion in the UK economy this year and a 2.2% expansion in 2012.

Investment growth is expected to limp along at around 3.7% this year but the CBI believes it will rise to 9.7% in 2012. The CBI’s Director-General, John Cridland, believes that we may see a somewhat lacklustre recovery but the UK will nonetheless “remain on track.” His views were endorsed by the CBI’s Chief Economic Adviser, Ian McCafferty, who expects economic conditions to remain tough during 2011 but, as salaries improve and inflation eases, prospects will brighten in 2012.

The Aviva study is rather less optimistic, at least so far as the 500 small businesses it surveyed are concerned. 28% of respondents believed that another recession was likely, while only 13% remained positive about the economy. Aviva’s Commercial Product manager, David Bruce, explained that many SMEs “feel they are in real danger of losing their businesses should the economy fail to improve this year.” He noted new revelations that banks involved in the Government’s much-touted ‘Project Merlin’ have missed important lending targets for SMEs.

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.

Although the initial jump from permanent salaried employment to freelance contracting requires resolve and more than a little courage, the Recruitment and Employment Confederation (REC) has told a cross-party parliamentary group that it brings many benefits to the individuals who make the transition.

PAYE umbrella contractors, as well as those freelancing through their own limited companies, consistently report greater job satisfaction than permanent employees, the REC informed the All Party Parliamentary Group on Freelancing.  Contractors working for umbrella companies enjoy all the benefits of flexible working hours, and frequently draw higher rates of pay for their services, advantages that help them to achieve a much healthier work-life balance than many permanent employees.  However, the REC went on to note that companies and organisations using contractors like this are also likely to be beneficiaries.  Not only is a satisfied workforce likely to be a more reliable and productive workforce, but a strong contractor community can also deliver numerous economic benefits.

REC Chief Executive, Kevin Green, told MPs that a major strong point of the UK’s labour market was its flexibility; a characteristic that he believed “should be enhanced at every opportunity.”  One of the main reasons that employment in the UK held up comparatively well compared to other economies during the recession was the wider availability of flexible working practises here, he explained.  Moreover, he maintained that these practises “…can also bring benefits now that the economy is recovering.”

Mr Green also emphasised that the benefits of a strong contractor workforce were not simply confined to economic considerations.

“Evidence shows that people who have taken control of their careers through freelancing and other forms of self-employment have higher levels of job satisfaction, as well as general health and wellbeing.”

Contractors working through umbrella companies could be the beneficiaries of an international growth in hiring activity, a new study suggests.

The latest snapshot of employment markets around the world from the global executive recruitment outfit Antal International shows a slight but detectable rise in hiring activity on figures recorded in February, when the last survey was conducted.  Although 17 per cent of respondents reported reduced headcounts, 52 per cent of those polled in June said that they had recruited additional staff at professional and managerial levels (in February, the figure was 50 per cent).  Moreover, the same proportion (52 per cent) plans to recruit further during the next quarter, which will bring a little cheer to PAYE umbrella contractors on the hunt for new placements.

Commenting on the survey, Antal’s Chief Executive Tony Goodwin said that the figures suggest the return of some degree of stabilisation to the global market.  The trend fits almost exactly with predictions made in February, Goodwin noted, although businesses from the Asia-Pacific region looked for more staff in the latest poll than the Americas, which had recruited more actively in February.

The figures are in line with a new UK-based survey.  The majority of sectors saw increased demand over the last quarter, according to the Reed Jobs Index for June.  Contractors working in engineering, professional services, general insurance and industrial areas are likely to have been especially busy, as demand for these skills reached their highest point since the Reed Index began.  Salaries, however, are not keeping pace with the availability of new jobs – the Reed Salary Index marked a two per cent drop over the last two months.

Umbrella companies supplying contractors with expertise in the IT skills market could well be seeing a flurry of demand for their services in the financial services sector, according to new research by the CBI and PricewaterhouseCoopers (PwC).

During the second quarter of 2011, the survey reveals that employment in the financial services sector soared by 11,000, a surge that was also accompanied by significantly increased business volumes in the sector.  On a slightly gloomier note, the study also shows that the rate of growth has started to slow and may continue to do so over the coming quarter.  Despite this tailing off, business volumes fell only in securities trading and banking.

CBI Chief Economic Adviser Ian McCafferty said that the employment expansion in the sector was both unexpected and heartening.  “Despite sharper cost increases and a small rise in non-performing loans,” he added, “firms’ profitability continued to improve with growth in volumes and incomes.”

The survey results follow news that Lloyd’s Banking Group is planning a cull of jobs totalling 15,000 by 2014 in its efforts to bring down costs.  PwC’s UK Banking Leader, Andrew Gray, cautioned that continuing concerns about economic growth and demand have dented banks’ confidence.  He added that the Independent Commission on Banking’s recommendation that banks separate their retail facilities from their investment banking units had led to an “unsettled quarter”, despite the apparent growth.  In addition, confidence had also been hit by the loss of PPI (Payment Protection Insurance), leaving banks with an estimated bill of over £5 billion in compensation settlements.

Despite the forebodings, PAYE umbrella contractors with skills in the sector are likely to remain in demand at least in the short term.

As the date for the implementation of the Agency Workers Regulations (AWR) draws closer, PAYE umbrella contractors across a wide range of sectors and skills may be wondering what, exactly the implications may be for their umbrella companies.  The EU regulations, which come into effect on October 1^st 2011, were designed to protect low-paid temporary agency workers from exploitation by obliging firms to pay them the same rates as their permanent counterparts and give them the same conditions after 12 weeks.  The difficulty posed for PAYE umbrella contractors, however, is that they are often highly skilled professionals who command pay rates significantly higher than permanent employees in a company do.

The Recruitment and Employment Confederation (REC) has moved to reassure its members that discussions with the Department for Business Innovation and Skills about the AWR are proceeding well.  The issue of the possible unintended consequences of AWR for umbrella companies is actively under consideration by BIS.

REC spokesman Phillip Higgins, recent talks have highlighted the importance of greater understanding about the role of umbrella companies vis-à-vis AWR and other legislation.  He described PAYE umbrella firms as a “rapidly evolving market”, and added, “…recruiters engaging candidates who use umbrellas should ensure they keep up with these changes.”

The Government, he went on, does genuinely appear to be focussing its efforts specifically on people who are intent of avoiding their legal obligations rather than on recruiters who make honest mistakes with the Agency Workers Regulations.

PAYE umbrella contractors, thankfully, have nothing to worry about in the ongoing deliberations about IR35 because they are safely beyond the scope of the controversial regulations.  However, following the release of the minutes of the IR35 Forum that met in May, it is becoming clearer that this issue might just be getting murkier, at least in one respect – “contractor segmentation”. In addition, it is unlikely to reassure freelancers working through limited companies that progress is being made.

The little-noticed “ contractor segmentation ” proposal, ostensibly made to improve HMRC administration of the regulations, may appear to simplify things from an HMRC perspective, but does it really address contractors’ concerns?

There will be disappointment for those contractors hoping that the new IR35 Forum will clear up the uncertainties related to IR35..  The proposed segmentation solution involves classifying contractors into three “ risk bands ” – low, medium and high.  Each section will receive specially targeted HMRC guidance.  Nevertheless, there is a glaring omission – contractors themselves are not to be informed about the criteria governing classification for each band.  Far from easing contractor uncertainty, this is surely likely to exacerbate it.

Some members of the Forum did point out that the new approach fails to distinguish between temporary workers and professional contractors, and does not assess the circumstances under which some temporary workers use agencies.  Thankfully, the minutes of the meeting record that HMRC has agreed to consider these issues further.  As to what happens next, we will have to wait for the next meeting, but it seems that improving the administration of IR35 is turning out to be rather more complicated than HMRC imagined.

Demand for PAYE umbrella contractors in the IT skills market looks set to grow at a healthy rate over the next few years, according to data just released by the technology analysis firm Ovum.

Whereas last year, the global IT services market grew by only two per cent, Ovum’s market trends research suggests that it will reach £463 billion by 2015 and will hit a 4.5 per cent growth rate by 2013.  Ovum’s lead market analyst for IT services, Dr Alexander Simkin, said that the IT services market was gradually recovering from the economic downturn.  Conceding that the turnaround has so far been patchy, with some servicing lines and geographies emerging faster than others, he added, “By 2013, we expect to see a return to pre-recession growth levels.”

There is a cautionary note in the otherwise positive developments, however.  Dr Simkin warned that the market “is not out of the woods yet and there will be small dips along the way.” Even so, strong growth is highly likely, especially in support services, infrastructure-led outsourcing, and business processing outsourcing.  Application led outsourcing and project services are also set to grow robustly.

In the aftermath of a frankly “dismal” 2008 and 2009, Dr Simkin continued, enterprise customers are now realising that they will need to make new application investments.  He said, “Vendors are making moves to rationalise and modernise applications in anticipation of pent-up demand for them”.

The report places IBM at the front of the line of growth-promoters in the global IT services market, with HP not far behind in second place and Fujitsu in third.

IT contracting, it seems, is about to prosper handsomely