Welcome to Contractor Corner, the series written specifically by Qdos Contractor for accountants with clients who are contractors.
Covid-19 and its impact on contract roles
All the way back in March 2020 we were plunged into our first national lockdown. Now, almost a year later, we are in the midst of the third. This has proved unpredictable and challenging, especially for recruitment.
While the impact of the Coronavirus pandemic has had a decidedly negative effect on people-facing roles such as hospitality or tourism, this is not true for all industries. In fact, we have seen some flourish, with businesses providing services remotely able to sidestep some of the more devastating effects of the pandemic.
Here’s our summary of some impacts of the pandemic:
Rising levels of unemployment: With 1.72 million in the UK without jobs, the rate of unemployment is at the highest level we have seen in the past five years. While this is an alarming statistic, it should be noted that according to research by Growthdeck the creation of new businesses neared an all-time high in September of last year.
With the levels of unemployment as they are, we expect to see more people turning their hand to self-employment. More workers choosing to be their own boss means more workers to connect with end clients, end clients that are finding themselves with a greater need for flexible workers than ever before.
Increased demand for temporary workers: Despite the rise in unemployment, we might be beginning to see an increase in the demand for contractors. In the beginning of the first lockdown we saw a stalemate in the hiring of permanent positions; however, the demand for highly skilled and flexible workers was steadily beginning to grow.
In fact, when lockdown finally began to ease, we saw the need for contract workers bounce back proving that contractors are seen as a valuable and reliable resource for recruiters in times of upheaval.
Contractor concerns: As part of our 2020 annual survey, here at Qdos we found that 53% of contractors stated their business performance for the year could be considered as ‘poor’. Of that 53%, a further 64% believed the biggest impacting factor upon their ‘poor’ performance for 2020 was the pandemic.
One of the greatest concerns for contractors in 2020 appeared to be the availability of contract work. Nearly a third of contractors surveyed claimed that their capacity utilisation was 25% or below. Furthermore, a concerning 8% of contractors surveyed claimed to have not worked at all in 2020.
You would not be jumping to conclusions to note that the uncertain economic climate owing to the Coronavirus pandemic has much to do with these worrying figures.
IR35 delays: In March we saw delays to IR35 reform. Now set to be introduced from April 6 2021, IR35 reform will see the responsibility for determining IR35 status switch from the contractors to the end clients of any medium or large businesses.
In terms of how this delay has impacted things for the recruitment of contract workers, this means that we have seen an increase in recruiters taking the time to prepare effectively for the reform. As such, contractors can feel more confident that IR35 compliance is going to be taken seriously this time around, as some businesses have even u-turned on their previous decision to use non-compliant blanket assessments.
In the run up to the reform implementation we are likely to see more and more proactive role determinations and, therefore, more roles being advertised as inside or outside of IR35 from the outset.
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