For roles between now and 2022, IT contractors can 'pick and choose,' despite the blot of IR35

More of the SAME. Some of the NEW. And a fair dose of ‘WE TOLD YOU SO’ or, at least, ‘WE’RE TRYING TO TELL YOU SO.’

Apologies to ContractorUK readers for using old adages to sum up the new state of IT contractor recruitment in 2021 but, while we’re at it -- here’s another, because the UK really is about to be in a temporary jobs market where its top technologists can ‘pick and choose,’ writes Matt Collingwood, director of IT recruitment agency VIQU.

More of the same

A bit like it was in April 2021, the more technical areas of the IT labour market are still in demand as we approach the heart of Q3. It is still a candidate-led market. For instance, IT contractors looking for jobs in AWS, software development, security products supporting cloud projects, RPA / AI are all particularly sought-after.

Tied to that (and not massively different to Q1-Q2), the so-called ‘aging technologies’ are less in demand. The result is that many of the contractors struggling to find new assignments are non-technical, hands-off, generalist IT-types. These technology professionals for whom the market might not be matching the heady heights which IT trade press headline-writers are pitching it at have historically worked across many industries and products.

Rates remain robust

Also largely remaining the same is the story on IT contractor pay rates. That’s because we have seen, and continue to see, many areas of technology employment largely unaffected by covid-19. For instance, AWS, software development, security products supporting cloud projects, RPA / AI . For these specialisms, rates continue to go up.

This ongoing rate climb is not all good news for everyone in the market. As a fellow agency boss alluded to ContractorUK last month, there are still numerous instances where a recruiter speaks to a contractor freshly back on the market, a rate is agreed, but within 48 hours the contractor has decided to pull out because they get contacted about a rival contract paying more.

The excluded

Certainly, this can be great news for certain highly-skilled tech professionals. But a lot of individuals in less technical, more generalist roles saw rates drop significantly, and for much of the pandemic, have been looking on at these dual-offer contractors with envy. Thankfully even their rates are now returning to pre-covid levels.

Finally on all things samey, it’s been ‘business as usual’ for us. In fact, our agency did not close during the pandemic but our contract book is pretty much exactly where it was in February 2020 – before covid hit. 

However, and in a neat segue into what’s new, the number of opportunities our permanent team is currently working on is up to 180% of what it was compared to the start of 2021! Clients are confident in the vaccine programme and in the tech market, and they want security after the continuous instability caused by the pandemic, so they see permanent recruitment as the currently favourable option.

Some of the new

So from their own varying stages of covid lockdown, a good deal of our clients have restarted hiring contractors. But many clients have shifted towards permanent hiring, believing it will give their hiring strategy stability.

Client naivety

However, there is a slight naivety from some of these clients regarding the permanent IT market. We have found that there are simply not enough highly-skilled individuals willing to go into permanent roles, so if a client is looking for a permanent professional in a high-value technical field, contractors will not have their heads turned and the client will likely struggle to recruit for that role.

Additionally, although I previously mentioned how the market is the same in parts as it was in April, we have experienced clients who believe the whole IT market is identical to how it was 12 months ago. This is not the case. Many candidates now have far more opportunities, so although some clients now require contractors to have more:

• Market awareness; or/and
• Industry experience; or/and
• Vertical technical experience

The clients demanding this trio were often getting some of these attributes during the pandemic. But clients today need educating on what the market is dictating now. And fundamentally, it’s not them – the buyers -- who are currently doing the dictating!

Why clients need educating

This shift in client expectations into the ‘unrealistic’ is quite easy to trace. For the last 18 months or so, and for the first time in a while (albeit until now), employers have had the ability to pick and choose from a larger talent pool because many individuals have been desperate for work.  That made it difficult for generalists to secure new assignments. Yet now, this state has inverted. It’s a candidate-led market and as an IT recruitment agency, we are now finding ourselves educating clients (again) on the state of the market and the need to be flexible where possible, because picking and choosing is, generally-speaking, no longer their prerogative.

Turnaround times & job boards

This shift has not only impacted contractors, but also recruitment agencies which are having to cope with higher turnaround times (from requirement to placement), because of how particular clients are (still) being with their requirements. This could be one of the causes of elevated and potentially unrealistic numbers of available IT jobs and contracts.

Additionally, longer turnaround times means that recruitment agencies often have to readvertise existing roles, and with many job board providers offering particularly good deals to advertise at the moment in order to drive traffic to their sites, some recruiters may be more willing than usual to readvertise roles that they normally wouldn’t!

Leaner recruitment agencies

There’s a lot in the news about IT recruitment agencies being ‘busier than ever’ and yes, it’s true to an extent. But remember -- most agencies’ are far behind where they were two years ago due to the covid-dealt setbacks over the last 12-18 months, so they are only now in ‘hyper growth’ because their customers are actively hiring.

For instance, the majority of big blue chip recruitment agencies are behind where they were two years ago and their performance has suffered. However, their growth and trajectory for the year ahead is positive. They are certainly down on profits, with many taking losses and significantly down on headcount.

‘Busier than ever,’ are you? Yes, but only because there’s fewer of you

From discussions with my network peer group, I estimate that only 75% of recruitment consultants are actually still working for recruitment agencies compared to March 2020. So there’s been a shift of talent moving away from agencies and leaner staffing numbers due to individuals finding different industries more profitable and stable during the pandemic, mistreatment and lack of trust, and the fact that many recruitment agencies paused their yearly intake of trainees and did not take on any junior recruitment talent. So although IT recruitment agencies like us are now actively hiring internally, this reduced recruitment workforce is contributing to reports that the recruitment industry is ‘busier than ever’.

We told you so (or are trying to tell you so)

No update on IT contractor recruitment in 2021 would be complete without a mention of IR35 reform – arguably the cause of the biggest shake-up to the contractor sector since IR35 was introduced 21 years ago.

The bonkers effects of bonkers PSC bans thanks to IR35 reform

Some 7.5% of our clientele are still using a blanket approach for IR35 and do not want to be introduced to PCS contractors. This ‘no limited company worker’ policy is in spite of our efforts to guide the organisation to make the right decision on behalf of their contractor workforce.

For instance, we recently worked with an American multinational manufacturer who still has a blanket PSC ban in place for IR35 purposes. Just to show you the effect of that ban, we can share with ContractorUK that the multinational required an ecommerce project manager contractor. Well if they were accepting of PSC contractors, we could have filled the opening within 5 days, or certainly by a maximum of 10 days. But with a PSC ban in place, the role took us SIX WEEKS to fill, largely because we couldn’t find a contractor with the correct skillset who was willing to go through a payroll partner (i.e. an umbrella company). Unfortunately, we know that this contractor is already looking for a new role as they are not happy working inside IR35!

Looking ahead

As we approach Q4 2021, we expect many IT contractors will be in the fortunate position to be able to ‘pick and choose’ the contract that suits them. This in turn will inevitably lead to some companies realising that their off-payroll-induced blanket PSC ban is inhibiting them from securing talent, and so it should become an open door to using CEST or IR35 advisories to fairly ascertain whether a contractor is working inside or outside IR35.

Additionally, we expect some of the currently breakneck demand for permanent techies to turn into contract opportunities. After all, we’re already hearing concerns from clients who are worried about the time it takes to secure permanent talent, the benefits they require and the length of their notice periods.