The last 12 months have seen a particularly turbulent market for contract work, with political and financial factors having a significant impact on contracts.
By far the greatest impactor on the market was the proposed reforms to IR35 legislation put forward by the previous Prime Minister Liz Truss. The question of whether or not the reforms would actually go through had seismic knock-on effects to the decisions of private sector contractors, many of whom opted to turn down work that was inside IR35, hanging on for the reforms to be scrapped. Equally, the political climate had an effect on public sector contracts also: each time the Prime Minister changes, public sector projects are often halted or delayed, due to difficulty in acquiring sign-off. With three Prime Ministers over the course of a single year, contracts were significantly impacted.
In terms of day rates, we have definitely found that contractors are looking for an increase in rate when a role falls outside of IR35; given this, IR35 rates have had to increase, or simply will not be accepted by contractors. In the other vein however, those working within the private sector will often consider taking a slightly lower rate for a contract that falls outside of IR35.
In these financially uncertain times, it seems increasingly likely that there will be an increased demand for contractors; or, at the very least, an increase in conversations around utilising them. The appeal of contractors is that companies can take on an interim workforce for specialist projects, and then relinquish them once that project is completed. This is obviously preferable to hiring a full permanent workforce and then having to make that workforce redundant if the project is unable to go ahead for financial reasons. This significantly minimizes risk. Equally, I would expect Statement of Work contracts to become increasingly common in the months and years ahead, as well as an increase in contract work overall.
When considering how best to prepare for the year ahead, my advice to businesses would be to consider all the factors. A lot of employers will dismiss the possibility of utilising contractors outright due to the cost, without truly considering the full cost of employer a permanent member of staff. With employee expenses such as holiday, pensions, tax, sick pay and other ongoing costs to consider, contractors offer a short-term alternative that minimizes risk, whilst the amount of work they are able to complete can increase business profits very quickly.
For contractors, my advice would be to have your CV and references in order, and to be increasingly wary of turning down work whilst waiting for a certain day rate: if you are sitting on the bench too late waiting for your ideal rate, you could be out of work for a long time. If a job only requires two thirds of your effort, then charge for this accordingly. Try to be flexible and fair, but negotiable. This is, in my view, the best way to approach the months ahead.