The UK government’s plan to lift lockdown measures has led to a marked improvement in recruitment activity in March. The latest KPMG/ REC Report on Jobs revealed that last month temporary billings expanded at the quickest rate since November 2017. With the outlook still uncertain, many firms will be looking to use contingent staff to support them through the coming months. While the upturn in hiring is good news, leading to signs of improving pay trends, there are also signs that supply isn’t meeting demand in some areas. Here we take a closer look at the latest trends in the contractor market as businesses prepare to bounce back.
Hiring bounce-back will offset IR35 reform
It’s been a difficult 12 months for many contractors with limited government support and the introduction of the IR35 reforms this month. However, the surge in demand for contingent workers is expected to offset some of the negative impact.
The crisis has made organisations think carefully about the makeup of their workforce as they map out their hiring plans for the recovery. With economic uncertainty arising from both the pandemic and the UK’s departure from the EU, businesses need to make cautious hiring decisions. Access to a flexible workforce will not only allow businesses to gauge the developing market while providing immediate solutions for the completion of key bounce-back projects.
Speaking about the uplift in March hiring, Neil Carberry, chief executive of the REC, said: “For months, we have been talking about the potential recruiters saw for a recovery in hiring as we got on with vaccinations and the lockdown did its work. Today’s data shows that even during lockdown, our labour market was bouncing back.”
Skills gaps emerging
With the economy bouncing back quicker than expected, a lower-than-projected peak in unemployment is likely. While the hiring rebound is good news, the sudden demand is revealing skills gap across many sectors where supply isn’t meeting demand.
In particular, demand for IT contractors rocketed in March as businesses required technology to underpin their recovery plans. Resource shortages are particularly acute for BI, Cyber, Data, Development, Java, Software and Engineering contracts.
There was also a marked shortage of construction workers this quarter, from both employers of permanent staff and agency workers, with demand remaining high in the sector.
The effect of the ecommerce boom means a real need for digital creatives and experts to help businesses stand out in this area. Businesses are keen to recruit CRM specialists, copywriters, designers and developers.
Other sectors experiencing high demand include nursing, medical & care; accounting & financial and leisure & tourism.
Unsurprisingly the only sector to note lower demand was Retail, which was down for both temporary and permanent vacancies. This is likely as a consequence of the pandemic restrictions and the ongoing shift away from the high street to online.
Post pandemic pay rates are holding up
While some firms might be tightening their purse strings, demand appears to be keeping contractor rates consistent with those available pre-pandemic. For example, an average day rate for a software developer sits at around £500, while a contract head of design is likely to be able to charge up to £450 for their services.
Across the board, rates for contingent workers increased for the first time in three months. The REC/KPMG survey also showed the first decline in the availability of temporary workers in March. Though only slight, researchers said it marked the first reduction in the supply of contractors since February 2020. This could be to do with a range of factors such as Brexit and the changes brought in to play regarding IR35.
Competition for contractors in many areas is likely to keep rates competitive. This could see businesses willing to negotiate favourable terms in order to attract the best flexible talent. This is particularly true for IT contractors and those with high demand skills.
One leading contractor website reported that contract extensions are up a 7% in the first quarter of 2021. This is likely due to both contractors accepting a move onto umbrella working because of IR35 reform, and in turn, some businesses negotiating on pay rates in order to retain access to certain skillsets.
Regional and Sector Variations
The Midlands recorded by far the strongest increase in temporary billings of all four English regions, while the softest was seen in London. This is consistent with Blue Collar hiring leading the upturn for contingent staff during March. Marked rates of growth were also seen across the majority of the remaining job categories. In the private sector, growth of short-term positions hit the highest since September 2018, while public sector vacancy growth was subdued in comparison.
Remote working revolution
The number of jobs advertised as remote working has quadrupled in the last year. As lockdown restrictions ease, some businesses will inevitably welcome people back to the office. However, the pandemic has shown that a remote workforce can be both productive and cost-effective.
There’s also a greater overall demand for flexible work patterns and contracts that don’t follow the standard 9-5 pattern – a style of working that’s natural for many contractors. As business adapt their systems for remote and flexible working, this could result in a wider use of contractors and greater range of contract types.
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