Crystal Umbrella

Umbrella companies and other employers will be required to automatically enrol their staff in a pensions scheme from October 2012 under new Government legislation. Even firms employing temporary workers for over 12 weeks will be obliged to adopt the same rule.

The Recruitment and Employment Confederation (REC) and National Employment Savings Trust (NEST) will attempt to clarify any confusion about the new rules in a workshop on May 17^th, which is free to all REC members. The organisation’s Head of Policy, Gillian Econopouly, billed the workshop as “an excellent opportunity” for members to understand what the new auto-enrolment reforms mean for them.

A major challenge that recruitment agencies may face when the legislation comes into force will be “churn:” around a million temporary workers are engaged on assignments at any one time in the UK, many of whom frequently change not only assignments but, on occasions, recruitment agencies in the normal course of events.

PAYE umbrella contractors whose company uses the same recruitment agency to find successive placements may be less affected by the reform, but large numbers of temporary workers are expected to want to opt out after their recruitment agency has enrolled them – a process which will be exceptionally time-consuming for recruiters who will find themselves constantly enrolling and un-enrolling staff. The REC has submitted its response to the Department of Work and Pensions consultation concerning the reform, warning that the additional bureaucracy will draw recruitment consultants away from their primary task of helping candidates find work opportunities.

Contractors working through umbrella companies or limited companies are likely to be intrigued by the views of a leading business futurologist who predicts that opportunities for remote and virtual working will rise steeply.

Dr James Bellini was commenting on a survey conducted by Orange National Business Awards which revealed that a large majority of UK businesses – 67 per cent – believe that new technology will drive massive changes in working practices over the next decade. By 2021, 40 per cent of those polled said that they expected the entire UK workforce (including themselves) to be working remotely.

As many PAYE umbrella contractors are already familiar with this style of working, they might consider themselves ahead of the trend. The business leaders surveyed were clear that a strong desire for improved work-life balance amongst British employees (and employers) would drive the trend forward as much as technological innovation.

Dr Bellini was forthright in his praise for freelance contractors and small businesses, whom he described as “extremely innovative.” He said that small enterprises and freelancers were playing a leading role in driving technological development forward. In particular, he singled out the life sciences and creative sectors, both of which he believes will perform especially well in the coming decade.

Dr Bellini’s comments came after a new exhibition was launched by Baroness Wilcox, the Minister for Intellectual Property, at the Life Sciences Centre in Newcastle.  This aims to educate young people living in the region about how creative new technologies can improve ordinary life.

PAYE umbrella contractors on the lookout for new placements have mixed news to take on board with the release of the Federation of Small Businesses’ latest Small Business Index. The survey covered 1700 firms across the UK and found a modest but healthy climb in confidence amongst those polled. Between January and March 2011, small business confidence rose by 6.7 per cent. This is in marked contrast to the whole of 2010, during which confidence declined in every quarter.

However, the survey also suggests that it’s not quite time to break open the champagne – job creation, including posts sought by contractors working through umbrella companies, was proving considerably tougher to achieve. During the first quarter of 2011, small firms found that they were continuing to lay off staff, although fewer anticipate cutting back on personnel in the months ahead. More than a third – 36 per cent – expect business performance to improve during the next quarter.

FSB National Chairman John Walker acknowledged that the cutbacks in personnel during Q1 were a worry, especially in a context where youth and female unemployment are both nearing 1 million. If the Government really wants the private sector to compensate for its public sector austerity measures, he said, “small businesses need a helping hand.”

Although small businesses appear to be bouncing back from the VAT rise, the harsh winter and the negative effects on consumer spending caused by rises in fuel costs, Mr Walker added that “questions still remain about the strength of the recovery.” Let’s hope Mr Cameron is taking heed.

PAYE umbrella contractors who have worked chiefly in the public sector may have to learn a new language if they are to find work in the commercial world, a leading recruiter has warned.

This month the government’s public spending cuts will really start to take effect and a veritable exodus of former public sector workers is well-nigh inevitable. Amongst them will be people considering setting up as freelancers and seeking work through umbrella companies in the commercial sector. However, such a step may not be plain sailing, according to Mark Staniland, Managing Director of Career Transition at Hays Recruitment.

Mr Staniland believes that many refugees from the public sector could well find themselves in commercial environments where they will need to talk “a completely different language” if they are to succeed in finding new work.

The expert went on to say that in order to secure new jobs, ex-public sector workers (which will include contractors who have worked predominantly in that sector) will have to show that they “understand how the private sector works, make their experience relevant and demonstrate commercial acumen.”

He also pointed out there were actually more similarities between the two sectors than many people seem to assume but jobseekers “need to be able to work hard to show how this is the case.” They will, he added, need support from their current employer if they are to find work in a more commercial environment.

Gloomily, the New Economics Foundation has forecast that as many as 1.4 million people could remain unemployed upon leaving the public sector.

Umbrella companies supplying professionals in the IT skills market are set for a bumper year in the London area thanks to the 2012 Olympics, according to the specialist IT recruitment company Langley James.

The firm’s founder and director, recruitment expert James Toovey, says that the city’s hosting of the games in 2012 should lead IT professionals across the UK to consider a move to the capital, at least temporarily. IT contracting in particular is likely to experience a major boost in demand, with the Olympic and Paralympic Games generating a major surge in short-term IT jobs ideally suited to freelancers.

Although IT job opportunities of all types will rise, IT specialists looking for short-term contractor posts are likely to be most in demand, he added. The sheer weight of the workload required to get the show up and running on time will feed this demand, as will the amount of time being taken off by people during the Olympics event itself. Temporary vacancies will have to be filled by adequately skilled and qualified staff.

IT professionals sticking to the permanent model of employment will not benefit nearly as greatly as temporary contractors, however, warned Mr Toovey, even though some long-term new ventures will start up on the legacy of the event. Mainly, short-term contractor posts will be available largely because of IT staff taking time off to view the Olympics.

If ever there was a good time for IT professionals to consider a switch from permanent roles to PAYE umbrella contracting, this is very probably it.

PAYE umbrella contractors may be amongst those to benefit from the new private sector-led “Start-Up Britain” initiative to support prospective entrepreneurs. Aimed at delivering the best possible support and advice from established entrepreneurs to startup companies, the project is a response to the Government’s call for an “enterprise-led recovery.”

Promising to champion the 270,000 new businesses staring up every year in the UK, Start-Up Britain could help generate new work for freelancers on contractor payroll as small firms adopt the growing trend for flexible workers rather than permanent staff. It has received warm endorsements from Prime Minister David Cameron and the Confederation of British Industry (CBI).

The initiative will provide new entrepreneurs with expert support worth £1,500 and is committed to promoting entrepreneurship within every school in England and creating Enterprise Societies in all UK universities. It has attracted the backing of several major international brands so far, including Virgin Media, Microsoft, Intel, Experian, BlackBerry, Barclays and McKinsey and Co.

Talking to the contractor news outlet Shout 99, Mr Cameron said that there were thousands of people in the UK who were entrepreneurs but just didn’t know it yet. There are, he insisted, “millions of success stories that haven’t been written yet.” He urged people who had been turning over good ideas in their minds for years to seize the opportunities offered by Start-Up Britain and “make it happen” to drive the economy forward.

The CBI’s Head of Enterprise and Innovation, Dr Tim Bradshaw, was equally positive, saying that the initiative could encourage more young people to become “business-savvy.” Providing extra support for entrepreneurs could, he believes, “inspire more people to take the plunge and start a new business.”

So, now we know: the Chancellor’s Budget documents make it clear that IR35 is here to stay. However, there is also a clear commitment to improving its administration by HMRC, in accord with one of the options raised by the OTS small business tax review.

A dedicated helpline staffed by tax specialists is to be set up and new guidance will be published clarifying the cases which HMRC consider to be beyond the scope of IR35. Furthermore, target compliance activity will restrict reviews to high risk cases and HMRC’s new approach will be closely monitored by a new IR35 Forum. The government appears to have taken heed of warnings in the OTS review that suspension of IR35 would jeopardise substantial amounts in revenue.

IR35 was introduced by the previous Labour administration in 2000 to prevent “disguised employment” by workers who received payments from clients through their own limited companies. Treated as dividends, these payments were not subject to National Insurance Contributions (NICs). Further evasions could be secured by splitting ownership of limited companies between family members, a tactic designed to reduce tax due by placing the income into lower tax bands. It should be noted that few owners of limited companies took these questionable actions, but many became subject to suspicion when IR35 became law.

Commenting on the decision to retain IR35, Crystal Umbrella’s Director of Service Delivery, Scott Illingworth, said that outright abolition at this stage would have created a policy vacuum, with no regulation at all. “This would almost certainly have led to a significant rise in non-compliance”, he added, resulting in an “even worse predicament than is the case now with an unreformed IR35 in place”.

Umbrella companies supplying the IT skills market may well have noticed a “huge rise” in demand for contractors with digital skills over the last twelve months, according to a new study.

Recently published research from the freelancer’s marketplace PeoplePerHour.com reveals that while the Government’s public spending austerities have caused a surge in unemployment, the resulting shortage of manpower in the public sector has been offset by a flurry of contractor hiring.

In particular, contractors with digital skills such as search engine optimisation, database development and web design have been very much in demand. PeoplePerHour.com recorded a massive 315 per cent rise in postings for contractors with these skills over the last year.

Xenios Thrasyvoulou, the website’s founder, said that the private sector responded rapidly to the recession by shedding permanent staff and turning to freelancers instead. Thousands of businesses in the UK, he added, quickly understood that the best way to survive the new economic realty was to engage freelancers on time-limited contracts. The decision helped them to “stay lean and remain solvent,” he said.

The public sector, it seems, has taken a leaf from the private sector’s survival book. PeoplePerHour.com’s findings lend support to the PCG’s recent endeavours to encourage refugees from the public sector to consider freelance contracting as an alternative. Contrary to popular belief, the organisation cites evidence that many “ex-bureaucrats” can successfully make the transition from the public sector to the private through contracting. The key obstacle identified by recruiters, the PCG insist, is poor self-belief on the part of ex-public sector employees.

PAYE umbrella contractors supplying the IT skills market are amongst those IT professionals experiencing greater confidence about their career prospects, according to a new poll by the recruitment firm reed.co.uk.

Three out of every four of the IT workers polled across the country are confident that they will be offered desirable roles over the coming six months. Speaking to the news provider “Recruiter” magazine, reed.co.uk’s Head of marketing, Mark Rhodes, said that the attitudes reflect a “slow and steady recovery” in virtually all areas of the private sector since the beginning of 2011. IT professionals appear to be especially positive about the immediate future.

Mr Rhodes went on to say that demand for IT staff is on the rise as more UK companies are “gearing up for a return to growth,” although he anticipates that the sector will once again experience a skills shortage as this trend gathers momentum.

The reed.co.uk poll coincides with data from the pre-employment screening firm Powerchex which reveals that offers for IT contracting in the financial services sector fell by 80 per cent in January. However, the figures also show a rise in contract offers of 3 per cent between January and February, and 8 per cent over the last year as a whole. In a press release, Powerchex MD Alexandra Kelly applauded the stabilisation in the number of confirmed appointments made to IT contractors, which was good news for those seeking contacting opportunities. But, she cautioned: “things have a way to go to recover in this area.”

Freelance contractors working through umbrella companies and limited companies are likely to support suggestions from the CBI, urging the Chancellor to make the determined pursuit of economic growth the top priority for his forthcoming Budget.

The employer’s group believes the government should focus on three key areas: dismantling barriers for high-growth firms, boosting domestic investment spending and enhancing export performance.

In its pre-Budget letter to Mr Osborne, the CBI also urged him to make changes to the tax system, arguing that the 50p income tax rate actively discourages the very entrepreneurship the government wishes to promote. Amongst a raft of other measures aimed at assisting medium to larger enterprises, the CBI also wishes the government to cut back on business red tape. This is discouraging many prospective smaller enterprises from even making a start.

CBI Director-General John Cridland said that the March Budget “must demonstrate a relentless focus on growth to get the UK working again.” An “all-action Budget” was urgently required to boost jobs, investment and exports, he added, with swift decisions on investment in the infrastructure playing a key part in the process.

The CBI’s advice follows recommendations made to the Chancellor by the Federation of Small Businesses last week, which called for policies ensuring economic stability. The FSB believes that only under economically stable conditions can smaller businesses develop the confidence to grow and hire more staff. Amongst the measures it advocated was an extension of a further year to the current National Insurance holiday, and providing finance for micro-businesses to take on apprentices.