Despite the welcome drop in unemployment revealed in last week’s figures from the Office for National Statistics, employer confidence remains fragile, driving many toward PAYE umbrella contractors and other temporary workers in 2012. So say experts from the REC and the Chartered Institute of Personnel and Development, both of whom agree that underlying economic conditions remain precarious despite welcome employment developments.

The REC’s Chief Executive Kevin Green said that the unemployment decrease was “good news and fits in with our data that shows employers intend to increase their numbers of both permanent and temporary staff over the course of the next year.”

However, he also noted the continuing turbulence in the eurozone and the parlous state of the UK’s economy following its double dip into recession. Any further bad news could hit employer confidence hard, he believes, and is already driving them to increase their use of flexible working arrangements. This is good news for contractors working through umbrella companies and less so for those seeking permanent positions.

His views were similar to the CIPD’s Gerwyn Davies, who was commenting on his organisation’s latest Labour Market Outlook Survey for the first quarter of 2012. Fewer hirers intend to cut their workforce compared to Q4 2011, although this does not necessarily translate into a rise in permanent vacancies any time soon, largely because of “the zigzagging economic backcloth.”

The CIPD survey shows that 31% of new public sector openings and 18% of new private sector positions in 2012 are likely to be temporary/contractor roles. Overall, roughly a quarter of forthcoming new vacancies will be temporary/contractor roles, as hirers remain cautious over appointing permanent staff.

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