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Public sector contractor rises are workforce innovation, not poor workforce planning

Increasing contractor demand in the public sector is not due to poor workforce planning, as the Government believes. Rather it is a result of the changing nature of the workforce and increasing recognition of the advantages of using contingent workers by public sector managers responsible for public services delivery.

Whilst the private and third sectors increasingly embrace the benefits that contractors and other contingent workers offer their business and operating models, the evidence suggests that central Government continues to display an increasingly dated perspective. You just have to look at a recent National Audit Office (NAO) report on Government contractor use, entitled ‘Use of consultants and temporary staff’ to see why this may be so.

The report shows that, although the Government has succeeded in reducing its annual spend on contingent staff by £1.5bn since 2010, figures are now back on the rise with contractor spend between £400-£600m higher than in 2012.

The increase in spend should not be a surprise – the private sector uses an increasing number of contractors as many labour market surveys confirm. But apparently perceiving growing contractor use to be a problem, head of the NAO Amyas Morse suggested that the figures provide an indication that: “the underlying issues [surrounding Government staffing] have not been fixed.

“Professional workforce planning to address skills and capacity gaps in key areas is essential to drive down dependency on consultants and temporary staff,” Moore continued.

By highlighting that contractors play a key role in meeting skills and capacity gaps within the public sector, Moore has pinpointed the very reason why contractors are such a popular solution for UK businesses.

Why it this such a problem to acknowledge that you can’t have, or in fact don’t want, to employ people when you only need the skills for a short period?

Contractors are experts in their various fields. Rather than simply turning up to make up the numbers, they are required to provide short-term access to key skills which are often in short supply.

So, for example, nearly every month, the Recruitment and Employment Confederation’s (REC) JobsOutlook highlights that short term access to strategic skills is the primary reason that most clients use contractors.

The fact that the Cabinet Office – whose approval departments must secure before appointing contractors whose contracts run beyond nine months – refused only one application in 2014-15, shows the integral part that contractors play not only within Government, but within the economy as a whole.

The NAO report itself concedes: “Significant skills shortages remain in the areas needed to transform Government, including project management and ICT, which are common specialisms of consultants and temporary staff.”

In a way, the acknowledgement that contractors provide effective solutions in skills shortage-stricken sectors makes the NAO’s call for a reduction in contractor spend all the more bizarre.

Skills shortages themselves offer a perfect case in point. As identified, the IT sector is suffering from a shortfall in candidates which is arguably more severe than in any other UK sector.

It’s no coincidence that contractor demand in this sector is expected to skyrocket over the next few years. Similarly, it will come as no surprise that IT consultants accounted for a quarter of Government spending on contractors.

It is for these reasons that contractors opt to leave the permanent workforce and strike out alone in the first place. They have a specialised skillset for which they realise they will see significant demand and consequently more lucrative work.

As such, the Government shouldn’t feel cheated by the figures showing that investment in contractors has increased over the past three years. Instead, these statistics are indicative of the changing nature of work and the increasing recognition of the benefits of using contingent staff – from everyone bar the Government that is.

If anything, it seems logical that Government spend on contractors has risen since 2012. More people are recognising the reciprocal benefits of flexible working and the contracting sector is growing as a result.

What has transpired is a sustained period of growth in the contracting sector over the past few years. If this leads to skills shortages in the permanent workforce, that’s just market forces at work.

The sooner the benefits of contingent workers are more broadly understood, the quicker we can put to rest this industrial-age mind-set towards contracting that has been evident within successive administrations for far too long.

This interpretation that contractors are solely intent on maximising their income has contributed to the raft of tax measures and damaging policy initiatives aimed at contractors that have emerged recently.

It seems similarly narrow-minded and somewhat ironic that - having introduced more and more red tape restricting contractors – the Government would turn around and express concerns over the cost of contingent staff, many of whom will have increased their rates to make up for income lost as a result of tax hikes.

Unfortunately for the Government, it can’t have it both ways. In this current climate, if it wants the skills necessary for innovation and progression in the public sector, more often than not it will have to look to contractors for their creativity and ‘can do’ approach.

The Government shouldn’t bemoan its dependence on contractors, as they offer substantial value during times of austerity when service levels must be maintained with fewer frontline resources. Contractors need to be recognised as the solution, not discounted as the problem.

Published: 27 January 2016

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