According to latest data from the REC, the recruitment industry in the UK grew by 25% in the last 12 months and a lot of this growth can be attributed to the increase in demand for PAYE umbrella company contractors.

Turnover from permanent placements was £2.5 billion – 37% up on the previous 12 months, but turnover from temporary assignments leapt up to £22 billion from £17.4 billion.

There were more than a million temporary placements in the 12-month period, compared to 879,000 in the previous 12 months.

Kevin Green, the chief executive of the REC, said that the recruitment market is still tough, but it is vital that UK businesses recognise the importance of having a flexible, highly skilled workforce.

Employers are understandably nervous about hiring full-time permanent members of staff at a time when the European economy seems to be crumbling. But strangely enough, this doesn’t seem to be translating into more opportunities for IT contractors.

In its latest Report on Jobs, the REC said IT contractor demand fell to a low of 52.1. Although this is up on the corresponding period last year, demand for temporary IT workers has now been falling for seven consecutive months.

However, demand for permanent IT staff is on the rise and KPMG, the co-author of the Report, said this was the one positive piece of news to come out of the latest research.

REC members are still struggling to find suitably qualified candidates to fill both full-time and temporary roles in Java Development and they have also had to contend with a shortage of freelance Business Analysts.

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Contractors may be interested to learn that the UK hires more online freelancers than any other European country.

Elance, the online freelance jobs market, recently released survey findings that showed that the UK hires the greatest number of online freelancers, followed by Germany, Switzerland and the Netherlands.

Fabio Rosati, the CEO of Elance, said the UK is leading the trend for online workers. Businesses appreciate the flexibility of a freelance workforce and contractors are snapping up online working opportunities now that traditional employment routes are stagnating.

He went on to explain that this trend could be seen across Elance’s platform as companies turn to freelancers and contractors to finish projects and fill skills gaps.

Maybe not surprisingly, companies in London hire the most contractors from the Elance site. However, in recent months, there has been an 89% growth in online hiring from firms in Birmingham and 59% from companies based in Reading.

Meanwhile, the REC will be extolling the virtues of the flexible working market when it participates in the European Employment forum later this month.

Tom Hadley will chair the meeting and will focus on the role recruiters in the private sector can play in national labour markets.

Hadley said he was delighted to be invited to such a high-profile event and says it shows recognition for the role the UK recruitment industry is playing in promoting flexible labour and helping to tackle youth unemployment.

In addition to the opportunity to highlight the REC’s Youth Employment Charter, the Forum in Brussels will provide a great chance to exchange views with other European employment experts, he added.

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Umbrella company contractors who are members of the PCG may be interested in a new scheme the Group has set up.

The PCG has linked up with Club Workspace to offer PCG Plus members a place to work when they have to go to London on business. Members will be able to access coffee-making facilities, a hot desk, showers and Wi-Fi at sites by London Bridge and in the City.

John Brazier, the managing director of the PCG, said a lot of members have complained that most of the working day ends up wasted when they have to visit London for a business meeting, because they have nowhere to work before or after. This is the PCG’s first step towards providing the support contractors need and ensuring freelancers are able to work whenever and wherever they need to do so, he added.

James Friedenthal, from Club Workspace, said his organisation was proud to be involved in this progressive partnership with the PCG.

Meanwhile, small businesses are increasingly turning to IT contractors to satisfy their IT demands.

PeopelPerHour.com says that 18,226 small businesses hired IT consultants in the last 12 months. This time last year, the figure was just 7,457. Small firms are particularly interested in contractors with experience in web design, IT training and SEO.

The North West has seen the biggest increase in demand at 79%, followed by the South West at 76% and London at 72%.

Xenios Thrasyvoulou, the CEO and founder of PeoplePerHour.com, said despite the turbulent economic climate, small firms continue to invest in IT and contractors will have a more dominant role to play in driving growth in the next five years. Small businesses have now realised that they cannot afford to ignore the wealth of talent available in the freelance market place.

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The PCG recently surveyed the freelance marketplace and discovered that there are currently around 1.4 million contractors in the UK; 41% or 574,000 of them are IT contractors.

Approximately 200,000 of the UK’s contractors work through an umbrella company, 406,000 are limited company contractors, a similar amount are agency PAYE and the remaining 294,000 are sole traders.

Back in 2002, the contracting market was doing exactly that and people thought contractors were finished. And yet here we are 9 years later and the freelance workforce keeps on going from strength to strength. Companies, especially in financial services, now appear to rely a lot more on IT contractors as a way of cutting costs.

Hot on the heels of news that RBS is cutting their IT contractor’s hourly rates by 10%, comes the news that Lloyds and Nomura are taking similar action.

Lloyds have cut the rate they pay agencies by between 10% and 15%. However, contractors who have been with them for at least six months will not feel the effects until their contract comes up for renewal. Nomura, on the other hand, have followed suit with RBS and last month cut contractor rates by 10%.

However, there are plenty of opportunities for skilled IT contractors outside the financial services sector. Cloud computing and security are still top of the corporate agenda and people skilled in developing bespoke mobile applications are likely to be in demand for many years to come. Individuals with SAP and .Net skills should also have no problem securing a contract.

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Contractors may be interested to learn that MPs from all the UK’s main political parties have pledged to address the false perceptions that exist around freelance contracting.

Brian Binley, the chairman of the all-party parliamentary group on freelancing, said the members of the group had committed to addressing the myths and assumptions surrounding the contractor community and better understanding freelancers.

Tory MP Binley said freelancers have a big role to play in the country’s economy recovery. They create a flexible workforce and are able to provide specialist talent at very short notice. But policy makers often overlook them and he cited IR35 legislation as a chief example.

The results obtained by the parliamentary group will help industry captains, such as Kevin Green from the REC and John Brazier from the PCG, understand why freelancers do not get the support and recognition they deserve from official channels.

Andrew Burke, a panel member from the Cranfield School of Management, says this lack of appreciation is due to a lack of research on freelancers’ economic status.

The PCG attended the latest APPG discussions and John Brazier explained that there were now at least 1.4 million freelancers working in the UK. The number of freelancers is still increasing and they are adding value to the UK economy. The PCG also pledged to conduct research into the economic importance of freelancers before National Freelancer’s Day on November 23rd.

The APPG’s report entitled “The Value of Freelancing” will be presented to government this autumn.

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HMRC should focus on detecting genuine cases of disguised employment rather than jumping to the conclusion that all freelancers are subject to IR35 rules, according to the REC.

Jeff Brooks, the REC’s Technology Group chair, stressed the importance of focusing on the rare instances of real disguised employment. He said it was essential to ensure the majority of contractors and umbrella companies do not have to worry about the possibility of an HMRC investigation or a tribunal that could drag on for several years.

The REC is a member of the newly created IR35 Forum which was set up after George Osborne decided to retain IR35 but improve its implementation.

Mr Brooks pointed out that the rules surrounding IR35 are unnecessarily complex and have created unnecessary uncertainty which has made the system unacceptable to both recruiters and contractors. The ambiguity and complexity of IR35 has also led to tax officials spending countless wasted hours on cases that do not fall within the scope of the legislation.

Last week, David Gauke, the exchequer secretary, outlined his commitment to improving the onerous legislation.

He started off by saying that HMRC is committed to overhauling the way IR35 is administered in order to address the concerns of the contracting community. He went on to say that the government has to get this right if taxation is going to be fair and allow contractors to provide their services in an appropriate way.

Chris Bryce, the chairman of the PCG, said he was pleased that the exchequer secretary had recognised the difficulties IR35 had caused freelancers over the last 11 years.

The IR35 Forum will give us chance to make a real difference and the PCG takes the challenge very seriously. We are determined to make HMRC clean up the administration of IR35 and provide clarity, consistency and transparency for all our members and the freelance community as a whole, he added.

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The number of women taking on interim assignments, some through umbrella companies, has risen to an all time high, according to the latest market audit from the IMA.

In quarter 3 last year, women completed 39% of all freelance assignments, up from 29% the previous quarter.

Paul Botting, the chairman of the Interim Management Association, said they encouraged a diverse mix in the interim management industry and hopes this positive trend will continue.

There was an 11% growth in the number of completed assignments in Q3 compared to the start of 2010, indicating moderate growth in the senior interim recruitment sector. 52% of assignments were for public sector bodies, whilst the private sector witnessed strong growth in demand for banking and finance interims.

Meanwhile, just over 80% of women think they are underpaid, but 74% of them do not know the industry standard for the role they perform, according to research from MySalaryChecker.com.

On the other hand, 34.5% of men know what they should earn and are quite prepared to make sure their employer knows it too.

Adecco’s Andy Powell said it’s important for people to understand how much the market rate is for their particular role. He added that he found it particularly disturbing that women believe they are underpaid without understanding their worth in the jobs market.

A report entitled How Fair is Britain, published last October, discovered that women aged 40 earn an average 27% less than their male counterparts.

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2011 could be a busy year for the UK’s small business technology sector as councils struggle to cope with the public sector spending cuts.

A recent report from ComRes shows that local councils in England and Wales think they will have to depend more on technology in order to deliver public services this year because of the cuts.

70% of councillors think that technology will have a greater role to play in delivering various services and 84% said that their local authority is open to improving efficiency by leveraging technology.

IT umbrella company contractors could soon find that local council technology projects are being outsourced to small IT firms and individual freelancers.

Meanwhile, billings for IT contractors in the public sector are once again increasing. Interquest, an IT staffing firm, says that the paralysis that affected freelance IT workers last year seems to have come to an end. The public sector organisations that it deals with finished downsizing their IT contractor workforce by the end of last summer, Gary Ashworth, the company’s executive chairman pointed out.

Many people feel the public sector will be a fly in the ointment this year for the IT sector, Ashworth continued. The public sector cuts were deep and opportunities for contractors shrunk by around 35% but the outlook is looking more promising. As government departments merge, they need to invest in IT to make sure shared services such as procurement and finance, work.

Ashworth expects to see increased public sector demand for contractors with enterprise architecture, programme transformation and customer relationship management skills.

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David Cameron has vowed that the government will focus on job creation in 2011.

The Prime Minister made the pledge in a recently delivered podcast, saying that the creation of jobs is uppermost in his mind as we move into 2011.

Cameron has already conceded that due to the budget deficit, the public sector will not be able to create new jobs and therefore the onus falls on the SME community, entrepreneurs and other freelancers to generate employment opportunities.

The PM said the government was going to look at ways to lift some of the barriers that prevent people from setting up on their own.

He said he wants to investigate all the reasons why it is so hard to set up, and grow, a business in the UK and the government will get tough to address them. Cameron wants to see a new economic dynamism in the UK and to achieve this the government will put extra pressure on banks to lend money to SMEs. More investment is also needed in the sectors of the future in order to create tens of thousands of new jobs in the green sustainable sector.

Despite Mr Cameron’s words, the PCG still believes that umbrella company contractors are in for a testing time this year. Redundancies, public sector spending cuts and economic uncertainty will all have a role to play in shaping 2011.

John Brazier, the MD of the organisation, says that the freelance community in the UK is in a good position to tackle the challenges ahead. A recent survey from the PCG showed that 60% of UK business leaders would struggle to operate without the help of contractors and more than 50% said the freelance community was essential if the economy is to grow.

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Umbrella company contractors and other freelance workers have been warned to be cautious of schemes that claim to be HMRC approved, when really they are referring to the reference number allocated to a scheme.

A spokesperson from the Revenue pointed out that just because HMRC has issued a scheme reference number, it does not mean that it approves the scheme or that it accepts that the scheme accomplishes the tax advantages it intends. Furthermore, even though a scheme claims to be approved by HMRC, it doesn’t necessarily mean that the statement is true.

HMRC says that there are some indicators to bear in mind when tax planning, one of which is the HMRC approved stamp. The Revenue could see this as an indication of tax avoidance and lead it to challenge a person’s Self Assessment tax return.

Other indicators to watch out for are schemes that sound too good to be true, confidentiality or secrecy arrangements and the use of offshore companies or trust for no logical commercial reason.

Meanwhile, the government is starting talks with three overseas tax havens in a bid to raise an additional £10bn by 2015.

George Osborne has confirmed that the UK is already having discussions with the Swiss government and the Alpine state could help in the taxation of British citizens’ assets held in secret accounts.

A recently struck banking transparency arrangement with Liechtenstein seems to be working very well and
delivering more than expected. Similar arrangements could be set up with the still to be identified three tax havens. If all the deals are concluded successfully, the government estimates it will raise £10bn in the coming years.

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Umbrella company contractors should start considering their retirement now. Recent research, carried out by Defaqto, shows that 44% of adults in the UK are not confident that they will be able to sustain a reasonable standard of living once they retire. That’s a rise from 38% last year.

Only 11% of the survey’s respondents now believe their retirement income will be sufficient to support a comfortable lifestyle, whereas in 2009, 16% were confident.

Defaqto said that people are starting to recognise that they will have to depend on their own savings as they get older. 30% of the adults surveyed now think that a personal pension will provide the majority of their retirement income. Last year, only 17% felt that way. Despite this, 61% still think they will need to depend on the state pension to survive. Commenting on the results, Matthew Ward from Defaqto said it was important for everybody to plan for their retirement as soon as possible.

Another poll, this time by YouGov, has discovered that only 22% of adults understand exactly how large a pension pot they need.

72% of people aged between 18 and 24 are completely in the dark when it comes to financing their retirement and maybe surprisingly, so are 29% of the over 55s. Whilst the people in the over 55 age bracket are unlikely to be able to build a substantial pension pot at such a late stage, the same cannot be said for younger freelance workers. Now is the time to start saving to ensure retirement expectations are met.

Nick Cann, the chief executive of the Institute of Financial Planning, agreed with Ward’s comments saying it is never too early to begin planning for future financial goals.

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Umbrella company freelance managers have a vital role to play in encouraging small business growth and profitability, according to Doug Baird, the MD of Interim Partners.

In addition to helping business development, interims also leave behind a long-lasting legacy for permanent staff that learn so much from them. The beauty of interim managers is their ability to quickly integrate into a new business culture and identify low-risk opportunities to enhance profitability. These are skills that senior executives that have spent many years in the same company do not always possess.

Interim Partners also reports that senior managers are prepared to see their pay reduce by up to 50% in order to secure a role at an SME. The average daily pay in a FTSE 350 company is £757 but managers would accept £350 a day if a suitable role was available in an SME. 31% of interims would prefer their next position to be with an SME, whilst for 20%, a FTSE-100 company would the organisation of choice.

9 out of 10 interims would also be happy to accept some of their payment on a performance related basis. Of those, 82% said they were willing to accept over 10% of their fee based on performance, while 39% said that more than 20% would be acceptable.

Last week, the PCG published the results of recent research showing that 73% of business leaders expect to either increase the number of contractors in their organisation next year, or at the very least hire the same amount as they did this year. According to the PCG’s MD, John Brazier, businesses now realise that the skills and flexibility available in the freelance marketplace are essential to business growth.

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