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Employers turning to contractors as skills shortages worsen

Ann Swain - APSCo

The latest ONS data certainly revealed some unprecedented results. While it was perhaps no surprise that vacancies are continuing on their upwards trajectory, rising to a new record of 1,295,000, between February and April 2022, the scale of the impact this has had on talent pools across the UK took many by surprise. Every business in every sector is aware that resources are in short supply at the moment. But this consistent growth of hiring demand throughout the year has meant that for the first time since records began, there are now more jobs than people in unemployment in the country. No amount of hiring investment or training can fulfil the resourcing needs of UK businesses. Skills, it would appear, are needed beyond the country’s permanent employment market.

A reliance on contract professionals
For the staffing sector and HR teams alike, this imbalance between headcount and job demand will be the greatest hurdle to overcome in the immediate future. What we are seeing is more businesses turning to the more flexible segment of the workforce to fill immediate gaps. In fact, recent data from APSCo revealed the scale of demand for contractors.

While the year to date has certainly seen recruitment activity increase, the holiday period in April did have an impact on hiring. According to our latest Recruitment Trends Snapshot, there was a general decline in professional vacancies in April, with permanent vacancies down -19% month-on-month.

The data, provided by the global leader in software for the staffing industry, Bullhorn, did, however, show that in the absence of permanent resources, there has a greater reliance on the temporary workforce with the demand for contract professionals increasing by 2% in the final half of the month, while permanent vacancies fell by -3%. Year-on-year, contract demand also grew 13% in April. Although this is lower than the 24% annual growth in the contract recruitment market that was reported in March, it does highlight the scale of pressure being placed on this flexible segment of the workforce.

It is also interesting to note that those recruiters placing contractors reported a 31% increase in revenue for contract placements between March and April, despite temporary vacancies remaining relatively stable during this time frame. This suggests that it is highly paid and highly skilled contractors that are in most demand in the current market.

It’s no secret that the UK has long needed to grow its own skills and the Government’s Levelling Up agenda demonstrated a clear need to expand the STEM knowledge of the workforce to support economic growth. The challenge, though, is that we’re now in an unfortunate environment where the UK isn’t as attractive for international temporary resources as it could be. There isn’t yet an appropriate entry route into the UK for the self-employed that appeals to these individuals. The recent launch of the Global Business Mobility visas was a step in the right direction, but the sponsorship requirement makes the route for independent contractors less viable.

The Government has effectively rolled over its existing multi-national trade obligation to offer a visa for self-employed independent professionals into the Service Supplier route, offering no new flexibility for these individuals which is what it needed. Unfortunately, this will not plug the short to medium term skills gap as the UK attempts to grow its own skills.

Legislation changes needed to support temp workforce
While there’s certainly a need to bolster the ability to attract contract resources from outside the UK, the reliance on the flexible market that the country currently has access to is also at risk. According to APSCo’s own Global Public Policy Director, Tania Bowers, the continued lack of clarity around the Employment Bill and a lack of concise legislation that is fit for purpose in the modern world of work could be detrimental to future recruitment plans:

“The UK’s employment market is not fit for purpose in the current economic landscape and APSCo has warned that the long-awaited Employment Bill needs to be pushed forward swiftly if the country is to recover from the impact of the pandemic and Brexit. It’s clear that the future of the labour market needs to be flexible, dynamic and fair, but current legislation is not designed to support this.

“The self-employed have a crucial role to play in the skills short environment that we are experiencing and ensuring these individuals are adequately supported and able to operate in a flexible manner without being penalised is important. We’re already seeing Off Payroll case law impacting this segment of the market and the UK is at risk of diminishing its own flexible workforce if action isn’t taken. Self-employed status needs to be defined in legislation that differentiates highly-skilled self-employed independent professionals from dependent contractors, workers, other variants of self-employment and the lower-skilled, less independent elements of the gig economy.”

Creating a future-fit solution
HR teams will only continue to face a scenario where the supply of talent doesn’t match the demand for skills unless something changes quickly. While the professional staffing sector and internal HR teams both have a vital part to play in unearthing the hard-to-find talent needed by organisations across the UK and indeed internationally, they will inevitably face the same problem: the current labour market is simply unattractive to the modern world. Unless the UK’s talent market becomes attractive on a global scale once again, this situation will only worsen.

As we have seen, APSCo’s data suggests that many hiring teams are increasingly utilising contractors, however, while this flexible segment of the workforce will continue to play a crucial role in economic growth for the country, with the elusive Employment Bill missing from the Queen’s speech and no clarity around the Single Enforcement Body (SEB), contractor talent pools could soon dwindle unless greater support is provided by our government. As the trade association for the professional staffing sector, we have been taking a proactive approach to this and will continue to urge the government to make the appropriate changes to ensure the UK labour market can meet the demands of a post Covid, Brexit and IR35 economy.

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