Contract Rates to Soar 25% to 30% – Despite IR35 and Coronavirus

26th March 2020

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Contract Rates to Soar

Top recruitment company, Robert Walters, expects contract rates to soar by as much as 25% to 30%. This is despite the twin IR35 and Coronavirus crises. The reason for this is the sudden spike in demand for tech jobs.

Contractor Questions on Contract Rates to Soar

Which is the fastest growing sector in the UK?
How much has demand for tech contractors risen?
Why are tech contract rates to soar?
Is the suspension of Chapter 10 IR35 by the Government a factor?
What are the main factors that will cause contract rates to soar?
Will companies look for contractors they have used before?
Will the coronavirus hit contractors much financially?
With contract rates to soar will blanket banning companies come cap in hand?
Will the Government, HMRC and big companies succeed in controlling the contractor market?
When will the Cavalry arrive to help contractors?

Which is the fastest growing sector in the UK

According to Robert Walters, the tech sector is the fastest growing sector in the UK. Indeed they say that the number of tech roles has increased by 48.27% compared with the same period last year.

The number of permanent employee roles has gone up also. But, at 32.56% not as much as for contractors. So, there is a huge pent up demand for contractors. That’s why Robert Walters predict contract rates to soar.

The economic laws of supply and demand state that if the demand for a commodity goes up without an equivalent increase in supply of that commodity then the price will be pushed up.

How much has demand for tech contractors risen

So, with demand for contractors up by over 48% and with no equivalent increase in supply, the price of tech contractors will rise. Robert Walters say that this rise will be in the range of 25% to 30%.

Those are astonishing figures.

I’m sure that some people will say “Robert Walters would say that”. However, although the amount of the rate rise is conjecture the rise in the number of contract vacancies is hard fact.

So that is sure to push up contract rates. The Demand is about to greatly outstrip the supply of contractors. And with such a figure of 48% more vacancies it is about to push rates up a lot.

So, those firms who have decided to keep their blanket banning of personal services company contractors may be fighting against the tide.

Why are tech contract rates to soar

So, what’s the reason for the sudden spike in contract vacancies?

Well, it is similar to the last downturn of around 2008. Whereas in the downturns of 1991-93 and the downturn of 2001 – 2003 contractors were seen as a cost and so vast quantities of them were laid off when the company wanted to cut costs, this time it is different.

There was a sea change in attitudes by companies by the time the 2008 downturn came along. IT Contractors especially were seen as the enablers of cost cutting rather than a cost in themselves.

Also, surveys showed that companies who kept their tech contract staff throughout the 2001-3 downturn had market advantage on companies who didn’t when the recovery came.

It seems that 25% of all new jobs created in London are tech related.

Wow!

Is the suspension of Chapter 10 IR35 by the Government a factor

It seems that following the sudden suspension of the Government’s new Chapter 10 IR35 rules, Robert Walters has seen a sudden spike in interest for IT contractors.

That’s very good news for contractors who walked out of some of our biggest companies rather than go PAYE.

It looks as though they will be rewarded now as more and more client companies chase fewer and fewer available contractors.

What are the main factors that will cause contract rates to soar

According Ahsan Iqbal, Technology Director at Robert Walters

“As digital infrastructure becomes the focal point for many internal business discussions, we do not anticipate a cancellation or slowdown in tech projects.

“In fact, there will be a revised focus on firms’ digital offering, with particular attention on improving e-comms channels through better CRM systems, upgraded website capabilities, improved security and enhanced accessibility and use of data.”

It seems that 18% of the new roles that ave come in during the last few weeks have been for programmers – but it is pretty much across the board in tech.

Will companies look for contractors they have used before

According to Ahsan: “As pressure mounts in the coming weeks and months on IT departments to help support remote working capabilities as well as business continuity plans, firms will look to strengthen their team with contract staff who have prior experience of in-house systems and a provide a strong sense of being able to ‘hit the ground running.”

That sounds like companies will be crying out for contractors they have used before. Will that include contractors who quit because they didn’t want to go PAYE?

That will be very interesting to watch.

So, that’s all great news for contractors – and they could do with it. Who would have thought that their numbers would be going up and their contract rates soaring with the twin threat of IR35 and coronavirus.

Will the coronavirus hit contractors much financially

Ahsan says that the coronavirus will not hit contractors much. He said:-

“The tech community is largely global – with different skillsets being used in different locations – and so professionals in the sector are quite used to using remote communication solutions in order to stay connected with their team or counterparts in other countries.

“Because of time differences, flexi-hours has always been a part of the IT culture and it is not unheard of to work 3 or 4 days a week if timings have been carefully considered to complete projects.

“In addition, video interviews and remote onboarding is not something that is new to tech professionals – especially contractors who often work away from the team – and so there will be little adjustment during this period.”

With contract rates to soar will blanket banning companies come cap in hand

One wonders if blanket banning companies like HSBC, RBS, Lloyds Bank, GSK and Sky Media will soon be in the market for PSC contractors. Or did they think they could rig the market in their own favour?

If they keep to just hiring inside IR35 contractors they are going to have to pay a whopping premium on top of that 25% to 30%.

Or they can pay 2 grand a week for a recent IT graduate from a consultancy. They could also take on IT developers etc. from offshore companies. But the quality of those is variable – and more expensive than contractors.

Will the Government, HMRC and big companies succeed in controlling the contractor market

The Government, HMRC and our biggest companies (including the banks) thought that they could control the contractor market.

Let’s see how they do when there are lots more contractor vacancies than there are out of work contractors.

The news has been terrible for contractors over the last few months.

However, the free market in flexible labour is about to re-assert itself. And those who sought to control the contractor market will have to stump up or get left behind.