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.

A contradictory picture has emerged in recent days about the health of the UK’s IT skills market.  According to figures in the latest “IT Monitor” report from the specialist recruiter Computer People, demand for IT workers remains consistently above the level of supply, with pay rates rising by 1.5 per cent last month.  IT contracting roles also expanded in July by 0.7 per cent – news that will be welcomed by many PAYE umbrella workers.

The report is upbeat about the future, forecasting that the healthy trend is set to continue as businesses invest in new IT projects over the next few months.  The firm suggests that a “war for IT talent” is gathering momentum, as firms endeavour to increase revenues, service “business as usual” requirements, and lower costs.  “Projects that were previously shelved are now coming back online and the addition of new projects means that both activity and demand is increasing at a steady rate,” the report concludes.

However, such an optimistic view has been complicated by another recent report that paints a rather dourer picture.  Figures compiled by another specialist recruiter, the IT Jobs Board, suggests that the UK’s IT sector is not emerging from the recession as rapidly as other European countries, with only 50 per cent of the UK’s IT workers securing pay rises last year.  69 per cent of their Dutch counterparts and 73 per cent of German IT workers saw their pay packets rise.

IT Jobs Board spokesman Peter Healy said that many UK IT workers do not believe that they will see pay rises in the foreseeable future, although they may see improvements in other benefits.

Contractors working for umbrella companies or limited companies are likely to endorse comments made by the Minister for the Cabinet, Francis Maude, who has just issued a warning to big business suppliers of Government services – make prompt payments to the smaller firms and contractors they use, or risk being named and shamed.

Mr Maude was forthright in his condemnation of late payments, which adversely affect small enterprises and individual contractors far more severely than bigger businesses.  He said, “Prompt payment is crucial to smaller companies.  The Government has an excellent record on paying our bills quickly and we expect our suppliers to do the same and pay sub-contractors well within the 30-day limit.  When work has been done, especially by an SME, it is just inexcusable not to pay up quickly for that service”.

Ominously for the indolent culprits, he added that the Government would be “keeping a close eye” on the performance of its big suppliers vis-à-vis payments to sub-contractors and “we won’t shy away from naming and shaming those that we find have failed to pay promptly.”

Moreover, the “close eye” Mr Maude spoke of is not just rhetoric – he announced that the performance of prime contractors will be monitored by all Government departments as part of routine contract management processes.  Contractors and SMEs with a grievance can alert the Government to any backsliding over payments due via the “Mystery Shopper” service, the details of which will then be published on its website.  Finally, the Government’s prime suppliers will be pressured into paying more quickly that the 30-day standard by the Crown Representatives Team, which co-ordinates the management of major suppliers across all departments.

Late payers beware.

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.

While it might seem a little callous to appear to be drawing some satisfaction from other people’s misfortunes, new figures on public sector unemployment from the Office of National Statistics may give PAYE umbrella contractors some grounds for optimism.  At the very least, they may encourage former employees to consider working through umbrella companies as an alternative to seeking permanent roles.

The ONS data shows that employment in the public sector plunged by 24,000 between February and April.  Though this cannot have been a pleasant experience for those who lost their jobs, the fact remains that essential public sector projects still have to be completed and vital services maintained.  With substantially fewer permanent staff to fulfil these functions, the question of who will perform them is an important one.

The staffing difficulties could lead managers to consider alternative recruitment options, hiring skilled contractors to complete specific projects for time-limited periods in order to ease the strain on existing employees and make up for lost skills.  This option would have the advantage of keeping permanent headcounts down whilst ensuring that vital projects are undertaken efficiently.

The news for public sector workers was not all doom and gloom, however.  The ONS report reads, “The number of people employed in the public sector fell by 24,000 over the quarter to reach 6.16 million but the number of people employed in the private sector increased by 104,000 over the quarter to reach 23.08 million”.

The private sector, in other words, appears to have vacancies for enterprising refugees from the public sector.  How many, one wonders, will choose the freelance contractor option?

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.

The youngest members of the UK’s workforce may well be considering switching from permanent posts to umbrella companies if findings from a new poll continue for much longer.  Employees aged 18 – 29 believe they have been forced to shoulder the heaviest workloads in the wake of the recession and many report suffering high degrees of workplace stress, according to a survey from the market research agency GfK NOP Engage.

One of the oft-cited benefits to joining contractor payroll is an improved work-life balance – precisely the issue that young employees complain is under almost intolerable strain.  The poll found that 40 per cent of young employees are stressed at work, while only 25 per cent of respondents aged 60 or over reported similar levels of workplace strain.  Two fifths of young workers claim that their employers coerce them into taking ever-heavier workloads on the grounds that tough economic conditions make it a necessity.  Many are now openly concerned about the effects of workplace stress on their work-life balance.

Of the 29 nations surveyed in the Gfk NOP Engage report, the UK ranked 17^th for employer engagement with young employees – hardly a ringing endorsement.  Especially when you consider that countries with far less developed economies, such as Turkey, Mexico and Macedonia, performed better in this respect than the UK.

Commenting on the findings, Sukhi Ghataore, Gfk NOP Engage’s Director, made an ominous observation.  Businesses that look on young employees as cheap and expendable labour may, she noted, live to pay the price.  Many managers, it would seem, need to up their game with respect to young employees if the economy is really going to thrive.

A new survey reveals that the number of women working in the IT skills market has been flourishing – and a substantial proportion of them is made up of PAYE umbrella contractors and other freelancers.

The number of women working in the digital sector has rocketed by 165 per cent, according to figures from the online business marketplace, PeoplePerHour.com. Almost half of the roles are in programming and design, while ten per cent are in database development and nine per cent in flash programming and wed graphics. Strikingly, 80 per cent of these women are working as freelancers though umbrella companies or limited companies.

The most spectacular rise was seen in the North, with a massive 1000 per cent increase of women entering the IT skills market in the region – and securing a 2995 per cent increase in earnings while they were at it. In the South, there was a more modest (though still impressive) increase of 72 per cent.

But that’s not all: women in the digital sector also managed to gain the highest rating for work quality, attracting an average “full marks” score of 5 out 5.

The IT skills market has for much of its existence been heavily dominated by males. But according to PeoplePerHour.com’s CEO and founder Xenios Thrasyvoulou, the latest figures “provide evidence that women have broken through the digital jobs glass ceiling and are now competing with men on both numbers of workers and on quality of work.”

The figures also show that women “are easily a match for men” and that attitudes have changed, Thrasyvoulou added: “Employers are now more likely to employ a digital worker based on the quality of their work rather than their sex.”

Contractors working through umbrella companies may be interested in recent research charting the effects of the recession on the freelance jobs market.  Recent studies by PeoplePerHour.com, Europe’s largest online jobs marketplace, and leading HR group, the Chartered Institute for Personnel and Development (CIPD) both suggest that as permanent posts disappear, freelance opportunities are rising.

PeoplePerHour.com’s study confirms the earlier findings from the CIPD research – work that had previously been kept in-house, especially in the public sector, is increasingly being outsourced to contractors.  More than 120,000 freelancers regularly scour the 70,000 plus jobs advertised on the PeoplePerHour.com website.  And, PAYE umbrella contractors take note, a fair proportion of those jobs were once available only as salaried posts in the public sector.

During 2010, the body count of salaried jobs axed from the public sector in the wake of government spending cuts reached a staggering 132,000.  But data from PeoplePerHour.com suggests that, for example, digital projects once kept in-house in public sector organisations are now being outsourced as never before: the number of digital job postings appearing on the site leapt by a breathtaking 315 per cent over the last year.

The switch to increased use of freelancers by public sector organisations is a relatively recent trend, at least when compared to the private sector, which turned to contractors swiftly when the recession started to kick in, cannily saving the additional costs associated with hiring permanent employees.

However, a worry about these trends is that saturation point may not be too far off – without truly substantial economic growth, and more public sector cuts on the way, the freelance jobs market could well start feeling a little overcrowded.