“I think this is the beginning of the end for Contractors”. After spending the last 8-12 weeks immersed in a tangle of IR35 changes with some of our key clients, this doomsday-esque statement is something I’ve heard in a number of conversations recently. Over the last couple of years, it’s probably a thought I’ve had myself on a few occasions but coming out the other side of the assessment and implementation processes, I now disagree! However, change is definitely in the air and the Contract market will probably be changed forever.
Can it ever be the same again?
Is the Contract market going to be the same as it has been for the last 15-20 years? No, it’s not and the catalyst has been IR35 in the private sector. It’s been such a significant change that it has pushed a lot of candidates away from Contracting altogether. Some dyed-in-the-wool Contractors that I never thought I’d hear utter the word “permanent”, let along take a Permanent job, are doing just that! But is it the end? No!
Contracting 3.0 is just around the corner and I firmly believe we’ll likely see some further changes over the next 6-12 months, similar to those that took place in the Public Sector after its IR35 implementation. These changes should help make Contracting a more attractive option than it currently is. And, as we saw increased activity in March & April 2021, there is perhaps a new-found confidence in this new direction of travel.
Let’s look at some of the factors for change
Organisations (typically the large corporate organisations) need a flexible workforce to respond to fluctuations in demand and the flexibility to scale projects up & down. Demand for skilled people to deliver the goods is increasing (with May activity also showing very positive signs) as the economy bounces back from the pandemic, smooths out post-Brexit, adopts new working practices, upgrades technology, digitises and so much more. Demand is high!
This has been a theme, particularly in Scotland, over the last few years, but there is still a significant skills shortage in certain areas, and I firmly believe that those skills will be coveted in this high demand market and Contract Rates will start to hit a premium level. It’s simple supply & demand and demand is higher than supply at the moment for certain skillsets.
However, right now the candidate market kind of feels like it may be about to plateau. Contract rate cards are all quite samesy, some recruitment processes are still quite poor in places (template/generic job specs!!!), and with a lack of feedback for candidates still a common theme, there’s an (understandable) apprehensiveness to move right now - plus the market has lost some of its fluidity. If companies don’t shift gear now, it could be a painful & tricky few months ahead and we’re starting to feel some of that already.
We know that the transition into Permanent roles won’t suit all ex-Contractors (or indeed employers). For those that have contracted for a number of years, flexibility/variety/project-based work are what attracts them to it in the first place. I appreciate Contract Rates and salaries/packages are as close as they’ve ever been but politics/HR conversations/Performance Reviews/BAU work will probably start to grind on a few (if you’re a Contractor or Contract Recruiter, you’ll know exactly what I mean here).
New ways of working and the much-hyped Hybrid approach (split between the home & office) should in theory make accessing a wider pool of flexible talent much easier now, assuming some of the changes remain in place. With one eye on a potential return to the office, some hiring organisations still seem a little reluctant to hire from other areas of the UK, but as the challenge to attract suitably skilled candidates rumbles on (and once everyone settles into a hybrid pattern) we’ll start to see that change and remotely based teams supplemented with Contractors should become the norm in due course.
The appetite for Statement of Work (SoW) Contracts is higher than it’s ever been (a solution that many of our competitors have embraced over the years and something we’ve just formalised ourselves through Certitude Managed Outcomes). With consultancy spend on the rise it’s becoming an increasingly appealing approach in a lot of organisations and it only strengthens the case for Contracting. Not all players in the market can afford or need (or want!) a full Consultancy offering, but the certainty and flexibility of SoW solutions is an attractive proposition. We’re really seeing things take shape in this space as the recruitment market reignites.
The future is positive
Is Contracting going to be the same as it once was? No, no it isn’t. But it is definitely not the end of it either. With the convergence of IR35 legislation and the legacy of a global pandemic on the collective psyche, a new dawn for how people want to live and work will create the conditions for “Contracting 3.0”. The definition may be blurrier than it was before, but as we move through the year, I fully expect going into Q4 ’21 and Q1 ‘22 that we’ll see the shift take form and the Contract Market will grow once again.
To chat further about the changes taking place in the Contractor market, please get in touch with me over here.
The information contained in this article does not constitute business advice and should not be acted on as such. This content is based on our understanding in May 2021. Head Resourcing are not liable for the information contained on any third-party websites linked to this article.