Further evidence of the impact of rebooted IR35 rules has emerged in new research findings from the Association of Professional Staffing Companies (APSCo): placements for permanent professionals climbed robustly year-on-year in February 2018, while those for contracting professionals plunged due to IR35.
APSCo’s member recruiters, who specialise in the professional jobs market, reported a 10% year-on-year rise in permanent placements in February, while demand for contracting professionals fell across many of the trade body’s core sector groups.
Although some of these decreases were relatively modest, the overall decline in contractor use amounted to 17% year-on-year. APSCo attributes this to a major year-on-year decrease of 38% in IT contracting after last April’s public sector IR35 reforms. The only sector to see an increase of contract roles was Finance, where demand climbed by 11%.
Research from APSCo last October had already detected a significant contract IT skills haemorrhage from the public sector, with many IT contractors leaving to work in the private sector rather than see their income slashed by IR35. Both APSCo and the Freelancer and Contractor Services Association (FCSA) have previously reported a concomitant rise in the use of PAYE Umbrella Companies by those public sector contractors who wished to remain and continue to work flexibly.
There were significant fluctuations between sectors in the professional permanent jobs market.
Placements for finance professionals climbed year-on-year by 24%, while placements for permanent marketing professionals fell by 6%. On average, salaries across all professional sectors climbed 2% year-on-year, although this conceals some notable variations: permanent IT and engineering professionals, for instance, saw salaries rise by 4.1% and 3.8% respectively.
APSCo CEO Ann Swain said that two key factors appeared to lie behind the strong performance of the professional jobs market with respect to permanent placements: hirers are competing keenly for rare skills and they are clearly uncertain about the future of more flexible options.
“While changes to IR35 legislation in the public sector have clearly taken a chunk out of the contract market, a proposed consultation on extending reforms into the private sector means that employers are increasingly weighing up if the perceived complexity associated with managing a contingent workforce is worth it.”
“Add to this the present BEIS (Department for Business, Energy and Industrial Strategy) consultation on Employment Status coupled with widespread skills shortages and it’s no wonder that businesses are keen to lock in talent long-term.”
This is potentially worrying news: the flexible workforce has largely accounted for record-breaking employment levels in the UK. A possible development is the continued rise in the use of Umbrella Companies to retain flexibility, but much hinges on the outcome of the forthcoming IR35 private sector consultation.