Crystal Umbrella

The founder of Ecademy, a social business network, believes that more companies are shunning permanent staff in favour of freelancers and contractors. Penny Power is an expert in business matters and she has said that this increase in freelance hiring is inevitable while the effects of the recession continue.

She said: “Businesses have hired consultants, suppliers and external advisers for a long time, but there is now a distinct shift toward a ‘networked model’ of resourcing your company rather than an ‘institutional’ one of having employees that work full time, when perhaps their niche skill is only needed for a smaller amount of the week. In a global market, that competes on costs, sourcing suppliers is the only way to keep your business competitive.”

Power’s comments are echoed by those detailed in the recent CBI report that explored a move towards more flexible workforces across all sectors. Power stated that she believes that focus will now be on freelancers’ core skills rather than their previous contracts.

She concluded: “A job is something that gives you security and ties you to the company, but only for as long as your are useful. ‘Work’ on the other hand gives you the freedom to look for the right type of work to suit you and allows you to find many people who may want you to ‘work’ for them as a supplier. Having six clients that you work for in a freelance or consultant capacity is far more secure than having one employer in the current climate,” says Power.

Many American and European companies have moved their bases to India in recent years in a bid to reduce costs. However, proposed changes to the taxation system in India could force them out.

Currently India has a rather complicated tax system. The Indian government has now tabled sweeping reforms which could seriously impact on any businesses working from their country. Part of the new reforms would consider all companies with a “management presence” in the country as being Indian tax residents. This would, therefore make such companies liable to taxation at a rate of 25%. Such reforms could result in a move away from outsourcing IT services to the sub-continent which has been such a prevalent trend for many years now. Most larger companies have an IT presence in India, many of whom choose to have software developed there as it is considerably cheaper than in the UK.

Commenting on this news, Pranay Satra from Ernst & Young stated: “The Indian Government’s proposals are immensely ambiguous. They could have a serious dampening effect on foreign investment.” Pranay also commented that such reforms are likely to ‘spook’ foreign companies.

Recently, many UK-based companies have come under fire for taking advantage of the ‘intra-company transfer’ system by displacing British workers in favour of cheaper workers brought in from India.

It would appear that India is now looking to benefit from their position in this industry.

Satya concluded: “As India has become more globally integrated, tax officials have taken radical new steps regarding global transactions – even those with only an indirect effect on India.”

Recent reports have suggested that HMRC are looking at the feasibility of outsourcing tax return processing offshore. This has raised a number of concerns regarding the security of confidential data within such an operation.

Internal documents leaked to Computer Weekly revealed that two of HMRC’s main IT contractors, Fujitsu and Capgemini, who provide services under the Aspire consortium have been asked to consider a number of options under the Quantum project with the aim of saving the department £205 million per annum.

HMRC is due to release an internal report on its Quantum project in the next month. It is expected that this will reveal plans to reduce the costs of the £8.5 million Aspire programme. This contract had been renewed back in 2004 but its costs have since doubled and HMRC are grappling with the need to cut costs while continuing to provide quality services. They also must ensure all of their departments work within the strictest security guidelines. Public trust in this area has hit an all time low due to some recent data security lapses by the government.

The Public and Commercial Services Union Capgemini Group have already released memos to HMRC Aspire staff stating that Quantum has considered “offshoring some future work”. The likelihood is that this would be in India. However, HMRC have stated to the Telegraph that the Aspire programme “does not permit” IT services to be delivered offshore and that this restriction is unlikely to be amended.

The disclosures made to Computer Weekly include a six point plan with the aim of improving the supply of IT and restructuring this service to ensure it maximises efficiency and value. This will then be standardised and tailored to meet the needs of HMRC. Aspire  and the services provided through this consortium will be central to the Quantum money saving initiative.

Cultural relations organisation The British Council have announces that they are planning to move hundreds of their contractor positions offshore. This is likely to affect non-core functions such as IT services. The British Council receives taxpayer funding but if these plans go ahead, around 250 contractors and freelancers in this country would be let go.

The British Council have also stated that they are currently going through a ‘transformation programme’ which will see them shedding many more contract staff in a bid to save £45 million. They have said that IT positions in their UK operations will be cut down to 100 from 185. They will be seeking replacements in India as they aim to consolidate their UK, Eastern European and Sub-continent IT units. They are also aiming to consolidate their financial centres by reducing their numbers from 5 down to 2. This will mean that forty jobs will be cut across their sites in China, Poland and Mexico.

Chief executive, Martin Davidson said last month, “We are not immune to the external financial pressures facing everyone today. We must adapt to these realities if we are to safeguard and grow our international relations work for the UK in the arts, education, governance, science and sport.”

“We will very shortly be outlining specific proposals for post reductions across the UK and on how we wish to select staff who have volunteered for redundancy.”

The Council previously vowed to work with unions after the potential job cuts came to light back in April, however they are now facing possible legal action due to the lack of consultation on the off-shoring of UK jobs.