Tag Archive | "public sector"

“Down The Drain!” – Public Sector and IR35 Reforms


It’s no secret that many public sector contractors were planning to down tools and head towards the private sector. The reason? IR35 of course.

Since these IR35 reforms came into effect earlier this year many experts have observed the so called “talent drain” from public to private…with one pundit quipping that the public sector is going “down the drain!”

This comes after a survey of nearly 1500 recruiters who hire contractors on a daily basis, and their opinion? What they have noticed is that public sector contractor placements have fallen off the map over the last few months, with 70% of recruiters noticing the shift towards the private sector.

I could have told you that…as regular readers of this blog will be all too aware. It’s just common sense though isn’t it really when you think about it, because if contractors are better off elsewhere and making more money they are going to take advantage of the opportunity, not sit around watching the clock while working for the government.

Samantha Hurley, the director of operations at the company behind this survey agrees with me, she said, “As we feared, it seems that these changes have had an adverse effect on the supply of contractors to the public sector.”

Some experts and pundits have even put a number on the amount of contractors who will eventually make the move from public to private, with 85% being touted as the total.

This is almost like the old days of the American frontier if you ask me, where thousands of Americans made the move from East to West, all in search of gold and new opportunities.

Only this is 2017 and it is the UK contracting scene, but that doesn’t change the fact there is a new gold rush to get excited about, but only if you make the move to the private sector. Those who stay put in the public sector, you miss out.

Julia Kermode, chief executive over at the Freelancer and Contractor Services Association, or FACSA as some people like to call them…she also agrees with me as this was a recent statement made by her…”We have seen decisions being taken by the public sector banning all workers who operate through their own limited company This has seen many contractors deciding to leave the public sector.”

Maybe the private sector gold rush won’t last for long though? Reports are suggesting that IR35 is going to be introduced there as well at some point, which of course, would totally annoy the vast majority of contractors.

Not only that, but the survey shows us that 78% of recruiters think that IR35 in the private sector would damage the UK economy as a whole, especially with Brexit just around the corner.

My message to contractors is make the most of the private sector while the times are good. Who knows, you might even be able to take an early retirement before IR35 comes in. Keep making that money.

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“Be Pragmatic” Says Accountant, Regarding IR35


The IR35 changes have had contractors complaining and moaning, there is no doubt about that…but should they all leave the public sector? Maybe not.

This is what one specialist accountant is saying anyway, who has recently gone on record to suggest that independent contractors who are currently working within the public sector should take a more “pragmatic” approach to the situation.

In other words, don’t rage all out war against IR35. Instead, try and find ways you can make it work in your favour.

The accountant went on to add that he acknowledges the fact that recent IR35 changes are probably the “most hated legislation” within the public sector contracting industry, but, contractors must remember that when the original IR35 legislation was introduced 17 years ago there was actually some benefits associated with it. In his opinion anyway.

More specifically, it was of benefit for loyal public sector employees who suddenly started to realise that the contractors they were working side by side with…well, in many situations those contractors were making more money and paying significantly less tax.

Many pundits over the years have claimed these contractors in the public sector are basically using special circumstances as a tax dodge, which isn’t fair at all, and that is why we have finally seen the recent IR35 changes in an attempt to level the playing field.

It might not be going how they expected though, because as I’ve reported about before, rather than sitting down and simply accepting these new changes, there are many contractors who are downing tools with the public sector and looking towards the private sector for better opportunities.

There are many who have already made the move, with thousands more expected to join them before the end of 2017.

This isn’t a temporary move either, because according to many public sector insiders what they are saying is the IR35 changes are going nowhere soon.

However, this particular specialist accountant reckons that contractors should not be totally against the IR35 changes, and in fact, if they were to get the right mindset about this whole situation then they could use it in their favour.

He suggests that contractors should not knock out IR35 completely, and instead, view working within the confines of IR35 as a “necessary evil” to get what they want.

What do contractors want, especially those in the public sector? According to the accountant it is NOT more money. Oh no. It is more flexibility in the way they work, which means that working with the IR35 changes as a self employed contractor, even if it means paying more tax, could give them the flexible lifestyle they require.

I’m not too sure about this one. Yes it is something that every contractor wants…flexibility that is, but should it come at a cost of paying more tax, which in many experts view is unnecessary and unjust? Especially when you consider that there is more than enough opportunities in the private sector, where there isn’t any IR35 madness but the same amount of flexibility is usually on offer.

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Research Confirms IT Contractors Leaving Public Sector


One subject I’ve talked about before is how IT contractors would be leaving the public sector once those unpopular IR35 tax changes came into force.

Well, it looks like I have been proven right, because new research has just confirmed that IT contractors are jumping ship and going elsewhere…mostly to the private sector where they are not subject to this IR35 madness.

Who can blame them though? At the end of the day, if you are getting money taken out of your pocket, which in your view is unfair, then of course you are going to down tools at the first available opportunity and seek out new opportunities.

The IR35 tax reforms came into effect during the month of April this year, and it means that IT contractors get taxed like an employee, which ultimately leads to a more expensive tax bill with some reports suggesting that it is costing 25% more than before. Not surprisingly, the vast majority of workers were, and are, outraged.

So what has the new research found out about IT contractors, the public sector and IR35? The first statistic that caught my attention is that 71% of those surveyed admitted that their income had taken a hit since the new tax changes.

A third of that 71% mentioned they now take home 15% less in their pay packet, while a further quarter said they were getting 25% less.

Out of the 1000 IT contractors surveyed, half said they had already or were planning to leave for the private sector, while 75% said the private sector is the place they would most like to be.

Who can blame them? In my opinion, there has never been a better time than right now to find an IT contracting job in the UK. Many companies in the private sector are actively looking for a wide range of skills, and if you have the talent, then you should be taking home a nice bit of change every week.

Not everybody agrees though, as the survey went on to show that 6% said they were sticking with their IT contracting jobs in the public sector and it was the best place to be.

I’m sure that some people didn’t get affected as much by the IR35 tax changes, and this is why they are content to keep on working in the public sector.

Recruiters have also had their say, with 77% saying that the private sector was now the most desirable place for IT contractors and 59% admitting that digital skills were lacking in the public sector.

This has led many experts to say that project delivery is now a concern within the public sector, and that a lot of projects will never see completion

Just look at the whole “making tax digital” saga as a perfect example of this. For a few years now it has been in the works, and then, unexpectedly, it was scrapped. Perhaps they no longer have the IT skills to make it happen? Who knows for sure.

What I do know that is many IT contractors are now moving boldly forward to a new and exciting life in the private sector, where more opportunities and money awaits them.

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Public Sector Contractors Walk Out – “had enough” They Say


As you might be aware, changes are about to happen in the public sector with thousands of contractors facing disruption to their tax situation.

It is the IR35 tax change that has got everybody up in arms, and the reason is because many contractors who work in the public sector will end up paying more tax, something which many of them don’t want to do, obviously.

This has lead thousands of contractors to simply down tools and walk out. “I’ve just had enough,” said one contractor who wanted to remain nameless. No doubt they are leaving the public sector and going to offer their services elsewhere in a bid to avoid IR35.

What were the government expecting though, did they really think people would take it? Reports suggest they came up with the idea of changing the IR35 system in a bid to make £440 million a year from 20,000 hard working contractors in the public sector.

What they didn’t expect was that many of these contractors are going to walk out and never go back. Looks like it’s back to the drawing board for the people at government HQ.

One of the biggest areas of the public sector that hires contractors is IT with an estimated 18,000 on the books of Central government.

However, many reports are saying that IT contractors are the most affected by IR35, and they are not impressed at all. One example is a recent defence related IT project that is no doubt crucial for the nation…but 87 of the contractors working on that project have already left, with many more expected to follow.

It’s also come to my attention that another project involving public sector contractors, this time consisting of security consultants…well, almost half of the people in that team have already moved on to the private sector.

Let’s be honest here for a moment. Is it really a surprise this is happening? Of course it isn’t, mainly because people don’t like to lose money. Simple really isn’t it, but for some reason the organisers behind the IR35 change just couldn’t see this. Or maybe they did and just don’t care? Who knows exactly what is going on here.

What I do know is that at the end of March thousands more contractors officially come to the end of their public sector contracts, and guess what…many are not going to be renewing.

Instead, they will go boldly into the private sector, where they are not going to be subjected to this IR35 madness.

The only way they will go back is if the government decides to not go forward with the IR35 tax change, but I don’t think that is going to happen.

In the meantime thousands more public sector contractors are going to be walking out and going elsewhere.

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The public sector: fantastic source of contract work?


Much has been said about UK austerity measures and how it harms the economy, but freelancers and contract workers may benefit from it believe it or not!

It seems a bit backwards, but it’s true: the public sector has scaled back its need for permanent workforce members by a considerable margin thanks to cost-cutting measures. This has spelled disaster for many public sector employees, but in a queer turn of events the austerity measures have created a market for interim workers such as umbrella company contractors and freelancers.

So why in the world has this happened? Well, it’s simple in that things still need to get done by these government offices and departments, despite the fact that they’ve made shedloads of permanent workers redundant. What’s the public sector to do but hire on a temporary workforce to help shore up their departments?

Recent research studies have shown that this is exactly what’s happening if you don’t believe me. The Chartered Institute of Personnel and Development’s latest survey found that private sector contractor billings are roughly half those in the public sector, indicating that there are a massive number of freelance billings just waiting to be filled; not only that but the survey also found that demand ratio for permanent employees to temporary ones is quite steep in the public sector while private firms seem to have a more balanced, less one-sided approach.

The good news for the self-employed freelancer or agency worker is that this need is likely to continue for quite possibly years, since these austerity measures are showing no signs of being lifted anytime soon. Of course, this spells horror for the rest of us, as these austerity measures are leaving any number of government programmes and schemes either criminally under-funded or utterly eliminated; it’s going to be cold comfort to any former permanent government employee that was given his or her walking papers upon learning that they’ve been replaced with a temporary worker instead, isn’t it?

Of course nothing is stopping disenfranchised permanent workers from embracing a contracting lifestyle and returning to work. Well, nothing except crippling depression and anxiety of course, but who doesn’t suffer from that in the current economy? David Cameron or George Osborne sleep well at night perhaps, but that’s most likely it – the rest of us are worried about how we’re going to pay the mortgage!

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Public sector freelancer hiring rate down by 15%


While private sector firms are hiring temporary staff with highly specialised technical skills, the public sector’s contractor hiring rate has slipped by nearly 15 per cent, according to a recent quarterly report from procurement firm Comensura.

Comensura’s most recent government hiring index found that the number of contractors and freelancers working in IT for state bodies such as local authorities declined by 14.5 per cent during 2012’s first quarter.  There was an even stronger contraction amongst other technical roles, such as engineers, with freelancer positions shrinking by 22 per cent, the index discovered.

However, there was one bright spot: construction freelancing positions were up by 28 per cent in comparison to 2011’s first quarter.  Hourly pay rates were found to have increased by 9.8 per cent as well, due to the effect of Agency Workers Regulations.

However, both male and female candidates were suffering from a reduced number of freelance or contract positions.  However, women did manage to scratch out some growth in comparison to last year, where only 44.9 per cent of temporary workers were female; last quarter saw 45.3 per cent of contractors as women, something that was attributed to the number of administrative workers, as cuts in that particular sector were smaller than expected; around seven out of every ten temporary admin workers are women, according to official statistics.

Worst off were younger workers, Comensura found, with year-on-year reductions of 26 per cent for the number of public sector temporary roles held by those between the ages of 25 and 34.

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Is the government forcing contractors into umbrella companies?


After the recent revelations that a lot of Government contractors were avoiding tax by paying themselves through a personal service company, the Treasury has announced that all contractors earning more than £220 a day will have to pay the correct tax if they have been in a department for longer than 6 months. This decision is likely to affect virtually all the IT contractors who work in a government department.

When Danny Alexander, the chief secretary to the Treasury, started looking into the issue of contractors he found that 2,400 individuals were paid off payroll. Of those 85% got paid via a recruitment agency, 5% were self-employed and the remaining 10% worked through a limited company. Around 1,680 of the contractors earned more than £400 a day.

The new get tough approach is designed to ensure that anyone working in the public sector will be on the payroll unless exceptional temporary circumstances prevail. Contractors earning at least £220 pay day will need to assure the department they work for that they are meeting their tax and NI obligations.

It looks as if the government is now trying to encourage contractors to use an Umbrella Company. It was recently shown that the Treasury collects an average £10,000 more per year from an umbrella company contractor than it does from one working through a limited company. With an estimated 200,000 umbrella company contractors currently operating in the UK, that gives the Treasury £2 billion.

The freelance community is now hoping that the government doesn’t try to push them into umbrella companies as well. The UK has 1.6 million freelancers; just think of the extra revenue if it did!

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Why are more people turning to self-employment?


Are more people in the UK turning to self-employment out of necessity rather than choice? This debate has been raging over the last few months and the news that self-employment has reached an all time high will no doubt start people talking again.

It’s probably no coincidence that as unemployment dropped by 45,000 in the first quarter of the year, the number of self-employed rose by 89,000. According to the ONS, there are now 4.6 million self-employed individuals in Britain.

Ben Salisbury, who comments for MyFinances.co.uk, believes that the increase in self-employment is due to people who were in salaried employment but have since been made redundant. There will be some who decided to try the self-employed lifestyle, but a lot will only be doing it because they cannot find another regular job.

Salisbury went on to say that public sector workers who have lost their job could well be happy to become consultants and receive more pay for working less hours.

However, Professor Patricia Leighton disagrees with this analogy. She has been analysing freelance working during a recession on behalf of the PCG. Her results show that there is little correlation between a recession and an increase in self-employment. She believes that people do not turn to self-employment solely because they have lost their job.

The CIPD is of the opinion that an increasing number of ‘odd-jobbers’ are swelling the ranks of the self-employed. Unemployment is being kept in check but this is due to low salary increases and an increase in low productivity work.

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Job opportunities in Scotland continue to increase


The latest Purchasing Managers Index from the Bank of Scotland was published at the beginning of the week and umbrella company contractors should be able to take heart from the results.

The report confirmed that the service sector led the way in job creation north of the border last month. Private sector output is also growing, although the rate of growth has slowed down slightly from the high recorded in March.

Bank of Scotland
chief economist, Donald MacRae, said the latest figures confirm that the economy in Scotland is withstanding the economic turbulence that is affecting other countries in the Eurozone.

The PMI in Scotland has now been expanding for sixteen consecutive months. The services sector experienced the most growth, but output in manufacturing declined slightly last month after increasing over the previous two months.

He went on to say that export orders increased for the second successive month. The slight downturn at the end of 2011 only caused a minimum drop in output and this fuels expectations that growth will return this year.

Meanwhile, recruitment agency Adecco recently revealed that opportunities for IT contractors increased in March. The technology sector saw a 3% increase in opportunities. The public sector is also starting to bounce back, registering a 2% increase in job opportunities in March.

Adecco MD, Steven Kirkpatrick, said the Agency Worker Regulations do not appear to have had any dramatic impact on the operations of British businesses.

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SMES still think its too hard to win government contracts


Despite government promises to make it easier for small businesses to win public sector contracts, it’s plans don’t seem to be working.

The FSB recently surveyed the small business community in the UK and discovered that 37% of SMEs believe that public officials still think larger firms are better.

More than 2,700 members of the FSB were questioned during the course of the research and it transpired that although one in seven SMEs had tendered for a public sector contract over the last 12 months, 41% of them had failed to get any business from their bids.

Of the firms that were successful, 50% said they relied on personal contacts and referrals when it came to searching for contracts, whilst 25% said the government’s Contracts Finder website had proved to be a useful source of information.

SMEs still think the tendering process is too complicated and 38% say the public sector should consider tenders based on ability and experience rather than the size of the competing firms. A similar percentage said the public sector should be actively looking to award contracts to small firms.

John Walker, the FSB’s national chairman, said the government has tried to raise public sector awareness of the value of using entrepreneurs and small businesses but it is evident that more work still needs to be done. Central government is now more inclined to give small businesses a chance, but other public sector organisations also need to undergo a culture change if the government’s initiatives are going to be truly successful.

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Women turn to contracting as redundancies kick in


4.132m people in the UK are now self-employed according to the latest employment statistics from the ONS. That’s an increase of 136,000 since February 2011.

A further 12,000 people turned to self-employment between December last year and February this year. However, it may surprise umbrella company contractors to learn that the number of women deciding to go it alone rose by 22,000, whilst the number of men turning self-employed actually dropped by 10,000.

When you look into the figures further it turns out that 77.7% of self–employed men work at least 31 hours a week, whereas only 39.6% of their female counterparts work as many hours. The greatest proportion of self-employed women (34.3%) work between 16 and 30 hours each week. 7.3% of go it alone females work less than 6 hours a week suggesting that they have just set up a small business to earn a bit of extra pin money while the kids are still requiring full-time care.

The gender split is still high with men making up almost 70% of the self-employed community, but is the tide changing? As the government makes more public sector redundancies, we could see further increases in the number of women taking the plunge and joining the ranks of the self-employed.

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Gartner revises global IT spending prediction


IT contractors may be interested to learn that industry analyst Gartner has revised its prediction for worldwide IT spending this year.

The company had originally predicted growth of 3.7% but has downgraded this forecast to 2.5%, the equivalent of £2.3 trillion, as companies continue to increase spending on the latest technologies.

In fact the revised prediction is more due to the strengthening dollar than to spending actually declining, according to analysts from Gartner. The dollar has been improving against other worldwide currencies and this this has reduced the predicted growth rate.

Gartner believes that if currencies were balanced, IT spending would grow by 5.2% this year.

Richard Gordon, Gartner’s research vice-president, said there are signs that the global economic outlook is improving despite the on-going global economic unrest. As well as problems in the Eurozone, the global economy is struggling to cope with rising oil prices and there are worries over China’s real estate bubble.

Public sector IT spending is likely to contract slightly throughout the world this year and next as Eurozone austerity measures impact. In the US Gartner predicts that public IT spending will remain flat this year and then contract slightly in 2013.

However, the mid-size business sector is expected to put in a strong performance over the next five years as companies increase their spend on enterprise software. The worldwide telecom equipment sector is expected to display the strongest growth.

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Lights are appearing at the end of the job vacancy tunnel


Recruitment agency Adecco recently said that the number of job vacancies was on the increase last month, news that will no doubt delight IT umbrella company contractors.

In fact, the IT sector recorded a 3% increase in job vacancies in March. Furthermore, in a complete reversal of recent trends, the public sector showed a 2% rise in job vacancies. Many of these opportunities were for temporary contracts.

Adecco’s MD, Steven Kirkpatrick, said AWR did not appear to have adversely affected temporary opportunities. There was a slight decline in the number of temporary roles advertised in January, but as this was only minimal it suggests that UK businesses have not changed the way they recruit.

ScotlandIS, the trade body, also recently reported that the technology sector north of the border is still expanding and there remains a high demand for suitably qualified individuals.

Yet another report, this time from ContractorCalculator, shows that the engineering and management sectors are also on the lookout for umbrella company contractors.

There is a general skills shortage in engineering and businesses that are recovering from the recession are now looking to increase their investment in infrastructure and energy projects. Employers also believe that IT contractors can provide them with a competitive advantage when economic conditions remain tough.

The report also pointed out that a third of interim management contracts towards the end of last year were in the public sector, which backs up the Adecco claim that the public sector is staging something of a comeback.

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Do we need a nurse-patient quota system in our hospitals?


The REC Healthcare division has welcomed recommendations from the Royal College of Nursing on ways to maintain nurse/patient ratios.

The RCN report underlined the importance of ensuring hospitals had enough staff to meet the needs of their patients, despite the government squeeze on public sector spending.

Tom Hadley, the REC’s director of policy and professional services, said the government should consider a system of nurse to patient quotas in order to maintain minimum staffing levels. He pointed out that similar systems work well in other countries and the UK urgently needs some objective criteria to address the increasing concerns that have been raised over the quality of care provided in some of our hospitals.

Recent reports in the media have brought the problem of insufficient staffing levels into the spotlight. A lot of these reports suggest nursing staff do not have the time to give patients the attention they deserve and set quotas could go some way towards solving that problem.

Specialist healthcare agencies also have a vital support role to play by making sure suitably skilled and properly vetted staff are on hand to fill staffing shortages at a moment’s notice.

It’s not only the patients who complain about staff shortages in our hospitals. Nurses are also very much aware that the shortage of staff, coupled with the endless paperwork they have to complete, means they are left with less time to devote to individual patient care.

The UK used to have a National Health Service that was envied the world over. The government needs to act quickly to solve the problem of staff shortages if it wants to restore the NHS to its former glory.

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Confidence among employers reaches 12-month high


The March edition of the REC’s JobsOutlook report showed that employer confidence in February increased to its highest level in 12 months. It also held good news for both temporary and permanent job candidates.

62% of employers said they intend to hire more permanent staff over the coming three months. Only 6% of respondents said they might reduce their permanent headcount over the period. Looking further ahead, 57% expect to increase the size of their permanent workforce and 42% intend to keep it as is. That suggests that only 1% of employers will be making redundancies.

31% of employers also intend to hire more temporary staff this quarter, whilst 54% say they will maintain their current level of temps. 26% will increase their temporary workforce over the longer term and 63% will maintain their current level.

In the public sector, employers are trying to reduce their workforce costs by cutting hours and pay and making more redundancies. In the private sector, almost 50% of employers see no reason to change their workforce plans.

Employers are still struggling to find suitably qualified staff for permanent roles in the computing, IT and telecoms sectors. Temps with skills in engineering and technical are also in high demand.

Roger Tweedy, the director of research at the REC said the latest figures are positive and although business confidence remains fragile, it is improving. We had a similar scenario this time last year, but employer confidence dropped sharply over the summer months. However, confidence in the jobs market seems to be more durable this year.

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Contractors still don’t get fair share of government work


Umbrella company contractors who had been hoping to benefit from more government contracts are disappointed that major corporations are still getting the bulk of the work.

According to the UK200Group, 92% of contractual orders are still being awarded to large businesses despite the coalition’s pledge to grant 25% to small businesses.

When the coalition came into power, it agreed to allocate 25% of external orders to the SME sector and put an end to mega IT contracts. But in the third quarter of last year, only 7.8% of state contracts were awarded to SMEs.

The UK200Group said that out of £3.6 billion worth of orders, only £227 million went to smaller suppliers during the three-month period and SMEs have good cause to feel ignored.

Jonathan Russell from Rees Russell accountancy firm said he was not unduly surprised by the results when you consider all the hoops businesses have to jump through to secure a government contract. He claims that government does not understand the way small businesses operate and presumes they have similar policies and procedures to large companies.

He went on to say that civil servants still expect small businesses to ‘sell to government’ whereas they should learn to buy from the SME community. As long as this mindset continues, the Civil Service will carry on wasting taxpayers’ money. The current procurement system is flawed by under delivery, overspending and lack of control.

He ended with a plea to the government to run courses to teach public sector organisations how to buy services.

© 2012 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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