IR35 and Off-Payroll Explained

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Contractors will benefit from global demand, driven by increasing talent shortfall

Contractors are set to benefit from global demand growth trends, as the number of international businesses negatively impacted by skills shortages increases.

ManpowerGroup’s 2015 Talent Shortage Survey shows that the number of firms reporting difficulty filling roles has risen to 38%. This marks a 2% increase from 2014 and the highest percentage seen since 2007.

“Through all of this uncertainty, the one constant is that talent shortages continue unabated,” notes ManpowerGroup CEO Jonas Prising. “From speaking to CEOs and business leaders across the 80 countries and territories in which we operate, I know talent shortages are something companies struggle with all over the world.”

Notably, a significant proportion of the survey’s respondents affected by the talent shortfall aren’t actively addressing recruitment issues, suggesting contractors can expect to find their skills to be sought after for the foreseeable future.

Contractors should target non-EMEA countries for contracts

Whilst the severity of these skills shortages varies widely across the globe, nine out of the ten countries reporting the least severe skills shortages are located in the Europe, Middle East and Africa (EMEA) region.

Interestingly, despite ongoing reports of deepening skills shortages, the UK is reportedly one of the countries experiencing the least difficulty filling roles. Only 14% of UK businesses report difficulties sourcing sufficient talent, a 2% increase since 2014.

Alongside Spain and the Netherlands, the UK is second behind only Ireland, where 11% of clients are experiencing recruitment challenges, suggesting contractors who are struggling to source UK-based contracts may enjoy greater success outside of the EMEA region.

“Looking at the comparisons, Hong Kong could prove a prosperous destination for finance contractors,” notes ContractorCalculator CEO Dave Chaplin. “Whereas looking closer to home, engineering or construction contractors may consider taking advantage of the considerable demand for talent in Germany.”

Japan is the country most severely impacted by the talent shortfall, with 83% of firms experiencing difficulty sourcing skilled candidates. Peru and Hong Kong follow with 68% and 65% of businesses impacted respectively.

Contracting professions dominate demand league table

The core contracting sectors are well represented in the global top ten of hardest to fill roles. Skilled trades – a category which encompasses construction workers – maintains the top spot for the fourth consecutive year.

Meanwhile, engineers and technicians hold third and fourth positions respectively. Despite enjoying a particularly buoyant year in the UK, finance professionals only came in seventh in the global table.

IT professionals fell to ninth, although recent media coverage suggests that contractor demand within this sector is set to surge over the next few years as a result of growing cyber-security concerns, coupled with a reduction in candidates and advancement in technology.

Prising continues: “The working population is declining, forcing employers to select from shrinking talent pools. Technology is evolving faster than ever, changing the skills needed for jobs and shortening the life cycle of those skills.”

The equivalent UK table is fairly consistent, with skilled trades again leading the way, reflecting the construction industry skills shortfall which has contributed to the slowing down of many commercial and housebuilding projects over the course of the year. Meanwhile engineers came in second, with finance professionals in fifth.

A positive takeaway for North Sea oil and gas engineers with diverse skillsets is that the engineering sector features prominently in the individual top ten tables for most countries.

Contractors benefit as engagers do little to tackle skills shortages

Despite the fact that almost two in five firms struggle to source candidates as a result of the global talent shortfall, more than one in five of affected organisations still aren’t actively pursuing strategies to address skills shortages.

39% of businesses that are addressing shortages are adopting new people practices, whilst 22% are looking to explore new talent sources, although the proportion of firms actively engaging in either practice has reduced since 2014.

This is in spite of the negative impact that skills shortages are expected to have on businesses. 78% of firms expect their ability to meet client needs to be impacted - of which 42% expect their competitiveness and productivity to decline, whilst 25% anticipate a reduction in terms of innovation and creativity.

Whilst this certainly isn’t good news for the already stretched global economy, contractors look likely to emerge as the main beneficiaries, as Chaplin highlights:

“The inactivity of businesses when it comes to addressing talent shortfalls is only going to compound the situation. We’ve seen a gradual incline in terms of skills shortages on a global scale for the past six years now, and it’s showing little sign of abating.

Chaplin concludes: “Inevitably, companies will look to contractors more and more when they find that they haven’t got the necessary skills within their employees’ ranks. Canny contractors should be able to take advantage of this global trend by continuing to upskill, and as a result they will find themselves increasingly able to command more lucrative fees.”

Published: 03 February 2016

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IR35 and Off-Payroll Explained