PAYE umbrella contractors have received a shot in the arm from a new study which shows that a majority of small to medium-sized enterprises (SMEs) in the UK consider freelancers vital to their stability.

The research, which was conducted by the specialist freelancer recruitment firm Office Cavalry, reveals that more than half of the 1,000 SMEs polled (52 per cent) believe that workers on contractor payroll will make a “significant contribution” to their workforce over the coming five years. A huge majority – 93 per cent – consider freelancers a “real alternative” to hiring permanent staff, which is encouraging news to contractors working for umbrella companies.

Commenting on the survey, Office Cavalry spokesman Andy Turner said that the figures show how much smaller firms are changing their operating methods. Amongst SMEs, there are growing initiatives to do business with the public sector, better access to finance and a turn towards flexible working arrangements for staff, he added. Together, these trends are “effective, scalable and flexible,” Mr Turner said.

Most commentators agree that future growth in the UK will be substantially driven by SMEs. Whilst organisations such as the Chartered Institute for Personnel and Development (CIPD) believe that initiatives such as the government’s proposed Employer’s Charter will have little impact on the UK’s labour market, there are growing signs that business confidence and consumer demand are returning. The REC’s latest Jobs Outlook, which was published last week, revealed that many UK companies are planning to expand their workforces during 2011, including hiring more temporary staff.

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