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Contractor rates continue up, but clients’ demand for permies is slowing that growth

Contractors’ pay is still increasing, but at its slowest rate in five months, according to the latest KPMG/Recruitment and Employment Confederation (REC) Report on Jobs. At the same time, demand for workers continued to rise, with the rate of expansion in March almost hitting January’s 15½-year high.

The conundrum that this slowing growth in contractors’ rates is in the face of increasing skills shortages is answered by the fact that salary growth of permies is rising at its fastest rate since July 2007. So the conclusion of the report is that skills-hungry clients are trying to tempt contractors into permanent roles.

ContractorCalculator CEO Dave Chaplin thinks there might also be a return of ‘natural permies’ back into full-time work: “It’s possible that the slowdown in rate rises for contractors is being driven by some who were forced into contracting due to the recession but are now going back to the perceived comfort zone of permanent employment.”

Bernard Brown, partner and head of business services at KPMG, notes that contract and temporary placements are strong, particularly in core contracting sectors: “The latest data suggests that engineering, construction and IT are the sectors hungriest for talent.”

The latest data suggests that engineering, construction and IT are the sectors hungriest for talent

Bernard Brown, KPMG

Among temporary and contract roles, the demand league table puts engineering in second place, construction in fourth, IT & Computing in seventh, accounting and financial in eighth, and executive and professional in ninth.

Despite the government’s attempts at cost-cutting, there were “solid increases” in demand for public sector workers in March, with the number of such positions overall showing a faster rise than private sector ones. Nevertheless, private sector temporary and contract vacancies recorded a strong rise, too.

The report noted that data from the Office for National Statistics backed up the evidence for growth, showing vacancies up 18.5% on an annual basis in the three months to February.

The availability of contractors has dropped at its fastest rate in almost 10 years. Chaplin says this points to good news on rates: “Although we’re seeing slowing growth in the rates offered to contractors, there is still growth, which has continued for almost a year now.

“And with the ongoing skills shortages hitting client’s plans to take advantage of economic recovery, the pace of growth in contractor rates is likely to pick up.”

Published: 08 April 2014

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