What can companies consider to access IT contractor talent as IR35-led shortages continue?

The appetite of end-users to hire has sharpened rapidly in the law few months, as companies forge ahead with their hiring plans but find themselves struggling to find the contractor talent they need across IT, construction, finance and marketing writes James Hallahan, director of Hays Technology UK & Ireland.

A seller’s market (and what those sellers want)

As such, the reliance on contractors to support projects and plug gaps as a result of skills shortages shows no signs of slowing. Organisations may further struggle to secure the best contractors if their offering on rates and benefits isn’t competitive enough.

Specifically in the technology sector, the key things that contractors look for in a new IT contract jobs (apart from the day rate obviously) are the work-life balance. That’s closely followed right now by where they’ll be based and then, in third place but also important, what flexible working options will be available to them.

However, because of the IR35 reforms introduced in the private sector back in April, many companies have shifted their approach to hiring contractors.

How IR35 has upended hiring

In data from our very latest quarterly survey* we ran in May 2021, over half (55%) of engagers said their approach to hiring contractors was to individually review IR35 status, and make off-payroll determination on a case-by-case basis.

Just 11% said their organisation has taken a blanket in-scope IR35 determination on all contractors. Even more positively, just 9% of engagers have enforced a ban on engaging with PSC (limited company) contractors.

The effects? Over a quarter (29%) of engagers reported that their ability to hire contractors has been impeded (quite simply, the hiring process has been more difficult), due to their chosen approach to the April 6th reforms. And as a direct result of the new off-payroll framework, 38% of engagers said they have faced increased costs, with 37% saying they have faced increased workloads due to no other reason than having to comply with the HMRC rules. Worryingly for a government that wants to get things done as we try to leave coronavirus behind us, 28% of engagers say they’ve have faced a loss of key talent, while 25% have suffered delayed projects.

As for contractors themselves, 15% said they have worked with an organisation that implemented a PSC / limited company ban. Of this percentage, 39% said that, as a result of the ban, they looked for an outside IR35 contract; 38% took the PAYE offer, and 30% looked for a permanent job.

So, with the IR35 legislation near dominating engagers and contractors day-to-day operations, what approaches can organisations consider to maintain access to the talent they need, as the labour market continues to hot up?

  1. Test IR35 on an assignment-by-assignment basis

This is one of the key ways to meet the requirements of the IR35 reforms, and it achieves governance, allows continued access to in-demand talent, and creates a competitive advantage over organisations that choose to apply a blanket approach to IR35.

However, it can be time and labour-intensive to put processes in place and continue managing to ensure compliance.

  1. Evaluate services procurement

Alternatively, organisations can evaluate how they procure services, such as project outsourcing. This approach can help to ensure project delivery. However, it won’t be suitable for all projects and can be more expensive than contingent labour.

  1. Keep tech project saviours happy

Contractors skilled in IT, Technology and Digital are going to be particularly hard to secure in the coming months. Our agents recently saw a 21% spike in demand across the tech space, and a 17% increase in contractors placed from the first half of 2021 to the second half of 2021.

For engagers who don’t want stalled technology-centric projects, it’s now critical to actively offer contractors an attractive proposition. And as mentioned previously, a competitive rate should represent only part of the good-looking package.

  1. Offer remote working as standard (and plug it to new hires)

Remote working isn’t anything new in the world of tech contracting. But it’s now become more of an expectation from contractors than before, following over a year of home working for many. This makes it a great time for engagers to gauge if their remote working offering is truly up to scratch. The general rule is that if your workplace uses remote working some of the time, there’s likely to be an appetite to have it offered more of the time.

Indeed, a significant proportion of tech contractors want to be based at home full-time from here onwards. If there’s flexibility on whether someone could work remotely, all or some of the time, we’re advising organisations to make sure this is clear wherever they promote a new role or contract, as freelancers and other covid-affected workers are going to be looking for it. Organisations which fail to do this could put themselves at a disadvantage when trying to secure experienced or niche technologists.

  1. Go for soft skills, not just technical skills

We know that organisations take on tech contractors for their deep expertise, but the right soft skills can really transform the success of a project.

Key soft skills we’re telling clients to look out for during the hiring process include strong communication, flexibility, and problem-solving skills. These three tend to enable contractors to have a more visible impact on tech projects.

  1. Check in and never assume

2020 was a tough year, and it took a toll on people’s mental health and wellbeing. Although contractors can be fiercely independent (and understandably so with IR35 hanging over their heads), we believe engagers should take steps to ensure they are properly supporting their flexible workforce, especially those workers primarily based at home.

It is these hard-workers supplying their services out-of-sight which can be harder for organisations to spot the signs of someone struggling. Our advice to end-clients? Check in regularly, ideally with a video call, and be aware of unconscious biases that could lead end-client staff to assume how someone may be feeling or coping. HR officers, line managers and the like should always ask -- don’t assume, when checking in with their contractors .

Editor’s Note: The Hays Quarterly Insights Survey was conducted in late May 2021 and received 8,301 responses. It was completed by professionals and employers from the UK working across a range of industry sectors.


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Written by James Hallahan

James Hallahan, Hays, Director of Technology Solutions (UK&I), has over 20 years’ experience in technology and digital recruitment, and solutions that deliver outcomes for customer success. James is responsible for delivering strategic growth across both the private and public sectors, through scaling existing products and services and innovating with new solutions to both existing and new markets within which we operate

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