Despite ambitious permanent hiring intentions for the next three months, UK businesses are increasingly relying on temporary contracting workers, the latest JobsOutlook survey from the Recruitment and Employment Confederation (REC) reveals.

More than eight in ten employers plan to hire more staff over the coming three months, and 29 per cent have appointed more staff over the previous year – but candidate availability is dwindling.

Respondents confirmed that, in this context, temporary workers had become considerably more important to them. Of the employers surveyed, 90 per cent said they needed temporary contracting workers to provide key strategic skills, while 58 percent stated they needed temporary staff to respond to growth.

The survey found that 95 per cent of employers are operating close to full capacity, but the data also suggests that they will find it increasingly difficult to source additional staff. Nearly half (47 per cent) had offered pay rises over the last year to retain and attract staff.

REC CEO Kevin Green said “Options are running out for organisations that want to take on more staff. Schools and hospitals are already facing enormous problems because of a shortage of teachers and nurses. SMEs and big businesses are both feeling the pressure. The need for people to do the jobs available is driving firms to become more innovative and creative in their recruitment strategies.”

The problem, however, is set to worsen considerably from April. Despite the rising importance of temporary contracting workers to UK businesses, the availability of skilled Umbrella Company Employees and other contracting professionals may well diminish drastically. This is the opinion of several industry experts who believe that this will be the result of the surreptitious rule change made by HMRC, which alters the definition of workers who are subject to “supervision, direction or control” (SDC).

Before the rule change, independent flexible workers were not considered subject to SDC. As a result, they have been able to claim tax relief on the substantial travel and subsistence (T&S) costs they incur on their journey from home to temporary workplaces. Contracting professionals are characteristically wiling to travel lengthy distances to deliver their talents to businesses on a time-limited project basis or to help with growth.

But from 6th April, they will be redesignated as subject to the right to SDC, not simply actual SDC as before, with the result that they can no longer claim tax relief on T&S. Umbrella Company trade body PRISM estimates that they will lose a third of their income overnight as a result.

The effect is likely to be either a major rise in pay rates, hitting both private and public sector budgets heavily, or a refusal to travel lengthy distances as before, depriving many more businesses of these workers’ much-needed skills.

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