REC reissues IR35 reform alert, as IT contractor demand keeps tumbling

Demand for IT contractors falling more and more into negative territory -- as it did in January for the third month in a row – has forced a staffing body to reissue alerts over IR35 reform.

As it did in July, the REC yesterday used its Report on Jobs to warn on the reform, in light of the changes disproportionately subduing IT placements, despite not even being in force yet.   

In fact, while the jobs market as a whole last month enjoyed its biggest rise in placements for over a year, IT contractor demand sank to its lowest REC index score since July 2009.

'Firms won't get notice'

Sounding aware of the IT contractor demand index’s almost 10-year low, and the many prior attempts of UK governments to improve IR35, REC’s Neil Carberry spoke out.

“Previous chancellors wanted to give the private sector notice, but firms will have none,” said Mr Carberry, the chief executive of the Recruitment & Employment Confederation (REC).

Challenged on LinkedIn, Mr Carberry clarified that the “issue” is that engagers who “plan to work through” the April 6th rules “won’t seem them” until a matter of just days before.

'Availability and placements impacted'

This concern about the final legislation not being visible to the very parties who will be both responsible and liable under it until March 11, Budget day, has been echoed by 14 agencies.

And the concern that Computing/Technology will be harder hit by the IR35 reforms than any other sector has been flagged up by FTSE-listed recruitment giant Hays.

“The upcoming IR35 reforms are having a negative impact on the availability and placement of temporary workers,” Mr Carberry said in Report on Jobs.

“It is vital that people pay the right amount of tax and that the system is fair, but for both of those things to happen we think the government needs to pause and think again on how IR35 changes. The temporary labour market is being stifled, and that’s not good for employers or our economy.”

'Don't like asking for delays'

In line with his ‘stifled’ characterisation, the confederation’s index showing the 10-year low records October 2019 as the last time that IT contractor demand grew (and even then, just barely).

Since then, demand for IT skills on a contract basis has turned negative, and is now accelerating, given it sank to 48.0 in January, from 48.6 in December and 48.8 in November.

“I don’t like asking for delays….but HMRC need to get the policy design right,” said Mr Carberry, implying the ‘wrong’ policy design is currently making clients stop engagements.

He added: “The biggest issue has been client-education, on the choices they now have.”

'Short supply'

According to REC member agencies in January, nine IT contractor skills were hard to come by; C#; CAD, Data Science; Database Development; Development; IT, Java and Technology.

The permanent IT market was in "short supply" of CAD, Data Science, Data Science, Database Development, Development, IT and Technology too, and four others – Analysis, Design Management, Software Engineering and Technical Sales.

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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