Bright prospects for IT contractors continue, as companies face extreme tech skills shortages

Costs for all of us may be firmly on an upwards trajectory but many organisations are continuing to invest heavily in their technology teams to deliver better solutions to consumers and enable digital transformation, writes James Hallahan, director of technology solutions (UK&I) at Hays.

What’s also obvious from Hays’s Contractor Day Rate Guide (June 2022) is that because skills shortages are acute – 95% of organisations are facing skills shortages and 91% have found it difficult to hire contractors over the last 12 months, demand for tech contractors is extremely high.

So, how does this affect IT contractors and companies hiring?

Impact of IR35 reforms

The IR35 reforms that were implemented in the private sector in April 2021, affecting large and medium-sized organisations, shifted the responsibility for determining whether a contractor is inside or outside IR35 from the personal services company (PSC) to the engager.

As a result of this, 57% of companies said the reforms have made it harder to hire non-permanent workers, and 61% have faced increased costs as a result of the reforms.

Also because of the off-payroll changes, more than a third (38%) of organisations experienced a loss of key talent and 36% say projects have been delayed as a result.

And we’re not out of the IR35 reform woods just yet. In fact, many organisations have told us that they expect these challenges to continue in the year ahead. For contractors, 66% said it is important that a future role is outside of IR35 – and if an assignment was determined to be in-scope of IR35, 61% of tech contractors claimed they would look for an out-of-scope contract instead.

More organisations in need of specialist skills

The specialist skillsets clients most need have almost all increased since last year, with cloud skills increasing from 52% to 62% of companies seeking these skills in particular, data and analytics (increasing from 40-45%), cyber security (33% to 42%), and projects and change management (42% to 48%) -- the most highly sought-after.

Daily pay rates are on the up

Pay rates for contractors have increased significantly in the past year. Fifty-seven per cent of companies surveyed increased their rates in the past year, with 34% increasing pay by 5% or more, with the majority agreeing that this will increase further in the next 12 months.

Overall, contractor tech day rates rose by 5.3%, increasing from just 0.8% in the previous year.

Perhaps the best illustration of that is cyber security. For such contractors, the day rate has significantly increased by an inflation-busting 13.9%. That’s closely followed by CRM -- up 7.9% and cyber security (finance technology), up by 7.7%. Day rates for software development roles also increased by 7.3%

For engagers -- be competitive and quick to hire, and consider remote working where possible

There’s no doubt about it, with high demand comes high day rates. But with more people working remotely following the Covid-19 pandemic, we’ve seen day rates level out for many UK contractor roles. You therefore might need to pay more than you expect.

As a starting point, if you’re an engager, it’s key to benchmark your offering.

It’s important that your time to hire is quick, otherwise, you risk a contractor being snapped up by another organisation. Keep the number of interviews to a minimum and make sure your hiring processes are as efficient as possible.

Next, don’t snub remote working. Tech contractors value a positive work-life balance and the option to work remotely. But our findings show that although almost half would prefer to work fully remotely, only a quarter of organisations offer this!

With the competitive market for talent showing no sign of abating, being able to give contractors the option to work remotely all or most of the time could tip the scales in your favour.

For contractors -- carry on investing in your upskilling and prioritise interesting products

As competition is currently high for tech contractors, and organisations are investing more in their digital transformation projects, I’d highly recommend choosing projects that interest you the most. Passion often speaks loudest at interview.

Additionally, although skills are in high demand, I’d advise contractors to continue upskilling and keep certifications marketable, so you can continue increasing your day rate over time. Plus, a bit like how this extreme heat we’re all labouring under right now will eventually end, what’s hot in the labour market today won’t necessarily be hot tomorrow. So do make hay while the sun shines, by getting some IT training under your belt. Investing in professional development while everyone else was cashing-in will impress once the market turns.

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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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